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                       NATIONAL AUTO FINANCE 1997-1 TRUST

                    6.35% AUTOMOBILE RECEIVABLES-BACKED NOTES


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                                    INDENTURE

                            DATED AS OF JUNE 29, 1997



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                          HARRIS TRUST AND SAVINGS BANK

                  INDENTURE TRUSTEE AND TRUST COLLATERAL AGENT





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<PAGE>
                                TABLE OF CONTENTS

                                       
<TABLE>
<CAPTION>
                                                     ARTICLE I

                                    DEFINITIONS AND INCORPORATION BY REFERENCE

<S>                      <C>                                                                                  <C>
SECTION 1.1                Definitions............................................................................2
SECTION 1.2                Incorporation by Reference of the Trust Indenture Act..................................9
SECTION 1.3                Rules of Construction..................................................................9
SECTION 1.4                Action by or Consent of Noteholders...................................................10
SECTION 1.5                Material Adverse Effect...............................................................10
SECTION 1.6                Conflict with TIA.....................................................................10

                                                    ARTICLE II

                                                     THE NOTES


SECTION 2.1                Form..................................................................................10
SECTION 2.2                Execution, Authentication and Delivery................................................11
SECTION 2.3                Temporary Notes.......................................................................11
SECTION 2.4                Registration; Registration of Transfer and Exchange...................................12
SECTION 2.5                Mutilated, Destroyed, Lost or Stolen Notes............................................13
SECTION 2.6                Persons Deemed Owner..................................................................14
SECTION 2.7                Payment of Principal and Interest; Defaulted Interest.................................14
SECTION 2.8                Cancellation..........................................................................15
SECTION 2.9                Release of Collateral.................................................................16
SECTION 2.10               Book-Entry Notes......................................................................16
SECTION 2.11               Notices to Clearing Agency............................................................17
SECTION 2.12               Definitive Notes......................................................................17

                                                    ARTICLE III

                                                     COVENANTS


SECTION 3.1                Payment of Principal and Interest.....................................................18
SECTION 3.2                Maintenance of Office or Agency.......................................................18
SECTION 3.3                Money for Payments to be Held in Trust................................................18
SECTION 3.4                Existence.............................................................................20
SECTION 3.5                Protection of Trust Property..........................................................20
SECTION 3.6                Opinions as to Trust Property.........................................................21
SECTION 3.7                Performance of Obligations; Servicing of Receivables..................................21
<PAGE>

SECTION 3.8                Negative Covenants....................................................................22
SECTION 3.9                Annual Statement as to Compliance.....................................................23
SECTION 3.10               Trust May Consolidate, Etc. Only on Certain Terms.....................................23
SECTION 3.11               [Reserved]............................................................................23
SECTION 3.12               No Other Business.....................................................................23
SECTION 3.13               No Borrowing..........................................................................24
SECTION 3.14               Servicer's Obligations................................................................24
SECTION 3.15               Guarantees, Loans, Advances and Other Liabilities.....................................24
SECTION 3.16               Capital Expenditures..................................................................24
SECTION 3.17               Compliance with Laws..................................................................24
SECTION 3.18               Restricted Payments...................................................................24
SECTION 3.19               Notice of Events of Default...........................................................25
SECTION 3.20               Further Instruments and Acts..........................................................25
SECTION 3.21               Amendments of Sale and Servicing Agreement and Trust Agreement........................25
SECTION 3.22               Income Tax Characterization...........................................................25

                                                    ARTICLE IV

                                            SATISFACTION AND DISCHARGE


SECTION 4.1                Satisfaction and Discharge of Indenture...............................................25
SECTION 4.2                Application of Trust Money............................................................27
SECTION 4.3                Repayment of Monies Held by Note Paying Agent.........................................27

                                                     ARTICLE V

                                                     REMEDIES


SECTION 5.1                Events of Default.....................................................................27
SECTION 5.2                Rights Upon Event of Default..........................................................29
SECTION 5.3                Collection of Indebtedness and Suits for Enforcement by Indenture Trustee.............30
SECTION 5.4                Remedies..............................................................................33
SECTION 5.5                Optional Preservation of the Receivables..............................................34
SECTION 5.6                Priorities............................................................................35
SECTION 5.7                Limitation of Suits...................................................................36
SECTION 5.8                Unconditional Rights of Noteholders To Receive Principal and Interest.................37
SECTION 5.9                Restoration of Rights and Remedies....................................................37
SECTION 5.10               Rights and Remedies Cumulative........................................................37
SECTION 5.11               Delay or Omission Not a Waiver........................................................37
SECTION 5.12               Control by Noteholders................................................................37
SECTION 5.13               Waiver of Past Defaults...............................................................38
<PAGE>

SECTION 5.14               Undertaking for Costs.................................................................38
SECTION 5.15               Waiver of Stay or Extension Laws......................................................39
SECTION 5.16               Action on Notes.......................................................................39
SECTION 5.17               Performance and Enforcement of Certain Obligations....................................39
SECTION 5.18               Subrogation...........................................................................40
SECTION 5.19               Preference Claims.....................................................................40

                                                    ARTICLE VI

                               THE INDENTURE TRUSTEE AND THE TRUST COLLATERAL AGENT


SECTION 6.1                Duties of Indenture Trustee...........................................................41
SECTION 6.2                Rights of Indenture Trustee and the Trust Collateral Agent............................43
SECTION 6.3                Individual Rights of Indenture Trustee................................................45
SECTION 6.4                Indenture Trustee's Disclaimer........................................................45
SECTION 6.5                Notice of Defaults....................................................................45
SECTION 6.6                Reports by Indenture Trustee to Holders...............................................45
SECTION 6.7                Compensation and Indemnity............................................................45
SECTION 6.8                Replacement of Indenture Trustee......................................................46
SECTION 6.9                Successor Indenture Trustee by Merger.................................................48
SECTION 6.10               Appointment of Co-Indenture Trustee or Separate Indenture Trustee.....................48
SECTION 6.11               Eligibility: Disqualification.........................................................49
SECTION 6.12               Preferential Collection of Claims Against Trust.......................................50
SECTION 6.13               Appointment and Powers................................................................50
SECTION 6.14               Performance of Duties.................................................................50
SECTION 6.15               Limitation on Liability...............................................................50
SECTION 6.16               Reliance Upon Documents...............................................................51
SECTION 6.17               Successor Trust Collateral Agent......................................................51
SECTION 6.18               Compensation..........................................................................53
SECTION 6.19               Representations and Warranties of the Indenture Trustee and the Trust
                             Collateral Agent....................................................................53
SECTION 6.20               Waiver of Setoffs.....................................................................53
SECTION 6.21               Control by the Controlling Party......................................................54

                                                    ARTICLE VII

                                          NOTEHOLDERS' LISTS AND REPORTS


SECTION 7.1                Trust To Furnish To Indenture Trustee Names and Addresses of Noteholders..............54
SECTION 7.2                Preservation of Information; Communications to Noteholders............................54
SECTION 7.3                Reports by Trust......................................................................55
SECTION 7.4                Reports by Indenture Trustee..........................................................55
<PAGE>

                                                   ARTICLE VIII

                                       ACCOUNTS, DISBURSEMENTS AND RELEASES


SECTION 8.1                Collection of Money...................................................................56
SECTION 8.2                Release of Trust Property.............................................................56
SECTION 8.3                Opinion of Counsel....................................................................56

                                                    ARTICLE IX

                                              SUPPLEMENTAL INDENTURES


SECTION 9.1                Supplemental Indentures Without Consent of Noteholders................................57
SECTION 9.2                Supplemental Indentures with Consent of Noteholders...................................58
SECTION 9.3                Execution of Supplemental Indentures..................................................60
SECTION 9.4                Effect of Supplemental Indenture......................................................60
SECTION 9.5                Conformity With Trust Indenture Act...................................................60
SECTION 9.6                Reference in Notes to Supplemental Indentures.........................................60

                                                     ARTICLE X

                                            REDEMPTION OF NOTES........


SECTION 10.1               Redemption............................................................................61
SECTION 10.2               Form of Redemption Notice.............................................................61
SECTION 10.3               Notes Payable on Redemption Date......................................................62

                                                    ARTICLE XI

                                                   MISCELLANEOUS


SECTION 11.1               Compliance Certificates and Opinions, etc.............................................62
SECTION 11.2               Form of Documents Delivered to Indenture Trustee......................................64
SECTION 11.3               Acts of Noteholders...................................................................65
SECTION 11.4               Notices, etc. to Indenture Trustee, Trust and Rating Agencies.........................65
SECTION 11.5               Notices to Noteholders; Waiver........................................................67
SECTION 11.6               Alternate Payment and Notice Provisions...............................................67
SECTION 11.7               Conflict with Trust Indenture Act.....................................................67
SECTION 11.8               Effect of Headings and Table of Contents..............................................68
SECTION 11.9               Successors and Assigns................................................................68
SECTION 11.10              Separability..........................................................................68
SECTION 11.11              Benefits of Indenture.................................................................68
SECTION 11.12              Legal Holidays........................................................................68
SECTION 11.13              Governing Law.........................................................................68
<PAGE>

SECTION 11.14              Counterparts..........................................................................68
SECTION 11.15              Recording of Indenture................................................................69
SECTION 11.16              Trust Obligation......................................................................69
SECTION 11.17              No Petition...........................................................................69
SECTION 11.18              Inspection............................................................................69
SECTION 11.19              Limitation of Liability...............................................................70

</TABLE>

EXHIBIT

Exhibit A -- Form of Note



<PAGE>
         INDENTURE dated as of June 29, 1997, between NATIONAL AUTO FINANCE
1997-1 TRUST, a Delaware business trust (the "Trust"), and HARRIS TRUST AND
SAVINGS BANK, an Illinois banking corporation, as indenture trustee (the
"Indenture Trustee") and Trust Collateral Agent.

         Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Trust's 6.35% Automobile
Receivables-Backed Notes (the "Notes"):

         As security for the payment and performance by the Trust of its
obligations under this Indenture and the Notes, the Trust has agreed to assign
the Collateral (as defined below) to the Trust Collateral Agent for the benefit
of the Indenture Trustee on behalf of the Noteholders.

         Financial Security Assurance Inc. (the "Insurer") has issued and
delivered a financial guaranty insurance policy, dated the Closing Date (with
endorsements, the "Note Policy"), pursuant to which the Insurer guarantees
Scheduled Payments, as defined in the Note Policy.

         As an inducement to the Insurer to issue and deliver the Note Policy,
the Trust and the Insurer have executed and delivered the Insurance and
Indemnity Agreement, dated as of July 23, 1997 (as amended from time to time,
the "Insurance Agreement"), among the Insurer, the Trust, National Auto Finance
Company, Inc. ("NAFI") and National Financial Auto Funding Trust.

         As an additional inducement to the Insurer to issue the Note Policy,
and as security for the performance by the Trust of the Insurer Trust Secured
Obligations and as security for the performance by the Trust of the Trustee
Trust Secured Obligations, the Trust has agreed to assign the Collateral (as
defined below) to the Trust Collateral Agent for the benefit of the Trust
Secured Parties, as their respective interests may appear.


                                 GRANTING CLAUSE

         The Trust hereby Grants to the Trust Collateral Agent at the Closing
Date, for the benefit of the Trust Secured Parties all of the Trust's right,
title and interest in and to (a) the Initial Receivables and all monies received
thereon on or after the Initial Cutoff Date (including amounts due on or before
the Initial Cutoff Date but received by NAFI, the Seller or the Issuer on or
after the Initial Cutoff Date); (b) any proceeds and the right to receive
proceeds with respect to the Initial Receivables from claims on any physical
damage, credit life or disability insurance policies or other insurance policies
covering Financed Vehicles or Obligors, including rebates of insurance premiums
relating to the Receivables and any proceeds from the liquidation of the Initial
Receivables; (c) all rights against Dealers pursuant to Dealer Agreements or
against Originators pursuant to Originator Agreements; (d) the related
Receivables Files and any and all other documents that NAFI keeps on file in
accordance with its customary procedures relating to the Receivables, the
Obligors or the Financed Vehicles; (e) property (including the right to receive
<PAGE>

future Liquidation Proceeds) that secures a Receivable and that has been
acquired by or on behalf of the Trust pursuant to liquidation of such
Receivable; (f) all funds on deposit from time to time in the Trust Accounts
(less all investments and proceeds thereof), and all rights of the Issuer
therein; (g) the rights and benefits, but none of its obligations or burdens,
under the Conveyance Agreements, including the delivery requirements,
representations and warranties and the cure and repurchase obligations of NAFI
under the Purchase Agreement; and (h) the proceeds of any and all of the
foregoing.

         The foregoing Grant is made in trust to the Trust Collateral Agent, for
the benefit first, of the Indenture Trustee on behalf of the Holders of the
Notes, and second, for the benefit of the Insurer. The Trust Collateral Agent
hereby acknowledges such Grant, accepts the trusts under this Indenture.

                                    ARTICLE I

                   DEFINITIONS AND INCORPORATION BY REFERENCE


     Definitions. Except as otherwise specified herein, the following terms have
the respective meanings set forth below for all purposes of this Indenture.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to them in the Sale and Servicing Agreement.


SECTION 1.1

         Act:  As defined in Section 11.3(a) hereof.

         Affiliate: With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. A Person shall not be
deemed to be an Affiliate of any person solely because such other Person has the
contractual right or obligation to manage such Person unless such other Person
controls such Person through equity ownership or otherwise.

         Authorized Officer: With respect to the Trust and the Servicer, any
officer or agent acting pursuant to a power of attorney of the Owner Trustee or
the Servicer, as applicable, who is authorized to act for the Owner Trustee or
the Servicer, as applicable, in matters relating to the Trust and who is
identified on the list of Authorized Officers delivered by each of the Owner
Trustee and the Servicer to the Indenture Trustee on the Closing Date (as such
list may be modified or supplemented from time to time thereafter).

         Book Entry Notes: A beneficial interest in the Notes, ownership and
transfers of which shall be made through book entries by a Clearing Agency as
described in Section 2.10 hereof.
<PAGE>

         Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a
day on which commercial banks in Florida, Illinois, Delaware or the state of New
York are authorized or obligated by law, executive order or governmental decree
to be closed.

         Certificate of Trust: The certificate of trust of the Trust
substantially in the form of Exhibit B to the Trust Agreement.

         Clearing Agency: An organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.

         Clearing Agency Participant: A broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.

         Closing Date:  July 23, 1997.

         Collateral:  As defined in the Granting Clause hereof.

         Controlling Party: The Insurer, so long as no Insurer Default shall
have occurred and be continuing, and the Indenture Trustee, for so long as an
Insurer Default shall have occurred and be continuing.

         Conveyance Agreements: The Sale and Servicing Agreement, the Sale
Agreement, the Assignment Agreement and the Purchase and Contribution Agreement.

         Corporate Trust Office: The principal office of the Indenture Trustee
at which at any particular time its corporate trust business shall be
administered which office at date of the execution of this Agreement is located
at 311 West Monroe Street, 12th Floor, Chicago, Illinois 60606, Attention:
Indenture Trust Division or at such other address as the Indenture Trustee may
designate from time to time by notice to the Noteholders, the Insurer, the
Servicer and the Trust, or the principal corporate trust office of any successor
Indenture Trustee (the address of which the successor Indenture Trustee will
notify the Noteholders and the Trust).

         Default: Any occurrence that is, or with notice or the lapse of time or
both would become, an Event of Default.

         Definitive Notes:  As defined in Section 2.10 hereof.

         Event of Default:  As defined in Section 5.1 hereof.

         Exchange Act:  The Securities Exchange Act of 1934, as amended.

         Final Scheduled Distribution Date: The Distribution Date occurring in
November, 2003.

         Grant: Means mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create, grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other monies payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
proceedings in the name of the Granting party or otherwise and generally to do
and receive anything that the Granting party is or may be entitled to door
receive thereunder or with respect thereto.
<PAGE>

         Holder or Noteholder: The Person in whose name a Note is registered on
the Note Register.

         Indebtedness: With respect to any Person at any time, (a) indebtedness
or liability of such Person for borrowed money whether or not evidenced by
bonds, debentures, notes or other instruments, or for the deferred purchase
price of property or services (including trade obligations); (b) obligations of
such Person as lessee under leases which should have been or should be, in
accordance with generally accepted accounting principles, recorded as capital
leases; (c) current liabilities of such Person in respect of unfunded vested
benefits under plans covered by Title IV of ERISA; (d) obligations issued for or
liabilities incurred on the account of such Person; (e) obligations or
liabilities of such Person arising under acceptance facilities; (f) obligations
of such Person under any guarantees, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; (g) obligations of such Person
secured by any lien on property or assets of such Person, whether or not the
obligations have been assumed by such Person; or (h) obligations of such Person
under any interest rate or currency exchange agreement.

         Indenture: This Indenture as amended and supplemented from time to
time.

         Indenture Trustee: Harris Trust and Savings Bank, an Illinois banking
corporation, not in its individual capacity but as indenture trustee under this
Indenture, or any successor indenture trustee under this Indenture.

         Independent: When used with respect to any specified Person, that the
person (a) is in fact independent of the Trust, any other obligor upon the
Notes, the Seller and any Affiliate of any of the foregoing persons, (b) does
not have any direct financial interest or any material in direct financial
interest in the Trust, any such other obligor, the Seller or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Trust, any such
other obligor, the Seller or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions.

         Independent Certificate: A certificate or opinion to be delivered to
the Trust Collateral Agent and the Indenture Trustee under the circumstances
described in, and otherwise complying with, the applicable requirements of
Section 11.1 hereof, prepared by an Independent appraiser or other expert
appointed pursuant to a Trust Order and approved by the Trust Collateral Agent
in the exercise of reasonable care, and such opinion or certificate shall state
that the signer has read the definition of "Independent" in this Indenture and
that the signer is Independent within the meaning thereof.
<PAGE>

         Initial Cut-off Date:  June 29, 1997.

         Insurance Agreement Indenture Cross Default: As defined in the
Insurance Agreement.

         Insurer Trust Secured Obligations: All amounts and obligations which
the Trust may at any time owe to or on behalf of the Insurer under this
Indenture, the Insurance Agreement or any other Transaction Document.

         Interest Rate: 6.35% per annum, computed on the basis of a 360-day year
consisting of twelve 30-day months.

         Internal Revenue Code: The Internal Revenue Code of 1986, as amended
from time to time, and Treasury Regulations promulgated thereunder.

         Note or Notes: The 6.35% Automobile Receivables-Backed Notes,
substantially in the form of Exhibit A.

         Note Owner: With respect to a Book-Entry Note, the person who is the
owner of such Book-Entry Note, as reflected on the books of the Clearing Agency,
or on the books of a Person maintaining an account with such Clearing Agency
(directly as a Clearing Agency Participant or as an indirect participant, in
each case in accordance with the rules of such Clearing Agency).

         Note Paying Agent The Indenture Trustee or any other Person that meets
the eligibility standards for the Indenture Trustee specified in Section 6.11
and is authorized by the Trust to make payments to and distributions from the
Collection Account and the Note Distribution Account, including payment of
principal of or interest on the Notes on behalf of the Trust.

         Note Policy: The insurance policy issued by the Insurer with respect to
the Notes, including any endorsements thereto.

         Note Policy Claim Amount: As defined in the Sale and Serving Agreement.

         Note Prepayment Amount: As of the Distribution Date on or immediately
following the last day of the Pre-Funding Period, after giving effect to any
transfer of Additional Receivables on such date, an amount equal to the
remaining Pre-Funded Amount in the Pre-Funding Account on the Mandatory
Redemption Date.

         Note Register and Note Registrar  As defined in Section 2.4 hereof.

         Officer's Certificate: A certificate signed by any Authorized Officer
of the Trust, under the circumstances described in, and otherwise complying
with, the applicable requirements of Section 11.1 and TIA ss.314, and delivered
to the Indenture Trustee. Unless otherwise specified, any reference in this
Indenture to an Officer's Certificate shall be to an Officer's Certificate of
<PAGE>

any Authorized Officer of the Trust. Each certificate with respect to compliance
with a condition or covenant provided for in this Agreement shall include (1) a
statement that the Authorized Officer signing the certificate has read such
covenant or condition; (2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements contained in such
certificate are based; (3) a statement that in the opinion of such person, he
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and (4) a statement as to whether or not, in the opinion of
such person, such condition or covenant has been complied with.

         Opinion of Counsel: One or more opinions of counsel who may, except as
otherwise expressly provided in this Indenture, be employees of or counsel to
the Trust and, if addressed to the Insurer, satisfactory to the Insurer, and
which shall comply with any applicable requirements of Section 11.1, and if
addressed to the Insurer, satisfactory to the Insurer.

         Outstanding As of the date of determination, all Notes theretofore
authenticated and delivered under this Indenture except:

                  (i) Notes theretofore canceled by the Note Registrar or 
         delivered to the Note Registrar for cancellation;

                  (ii) Notes or portions thereof the payment for which money in
         the necessary amount has been theretofore deposited with the Indenture
         Trustee or any Note Paying Agent in trust for the Holders of such Notes
         (provided, however, that if such Notes are to be redeemed, notice of
         such redemption has been duly given pursuant to this Indenture or
         provision therefor, satisfactory to the Indenture Trustee); and

                  (iii) Notes in exchange for or in lieu of other Notes which
         have been authenticated and delivered pursuant to this Indenture unless
         proof satisfactory to the Indenture Trustee is presented that any such
         Notes are held by a bona fide purchaser;

provided, however, that Notes which have been paid with proceeds of the Note
Policy shall continue to remain Outstanding for purposes of this Indenture until
the Insurer has been paid as subrogee hereunder or reimbursed pursuant to the
Insurance Agreement as evidenced by a written notice from the Insurer delivered
to the Indenture Trustee, and the Insurer shall be deemed to be the Holder
thereof to the extent of any payments thereon made by the Insurer; provided,
further, that in determining whether the Holders of the requisite Outstanding
Amount of the Notes have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any Transaction Document, Notes
owned by the Trust, any other obligor upon the Notes, the Seller or any
Affiliate of any of the foregoing Persons shall be disregarded and deemed not to
be Outstanding, except that, in determining whether the Indenture Trustee shall
be protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes that a Responsible Officer of the
Indenture Trustee either actually knows to be so owned or has received written
notice thereof shall be so disregarded. Notes so owned that have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Indenture Trustee the pledgees right so to act with respect
to such Notes and that the pledgee is not the Trust, any other obligor upon the
Notes, the Seller or any Affiliate of any of the foregoing Persons.
<PAGE>

         Outstanding Amount: The aggregate principal amount of all Notes
Outstanding at the date of determination.

         Predecessor Note: With respect to any particular Note, every previous
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purpose of this definition, any Note authenticated
and delivered under Section 2.5 in lieu of a mutilated, lost, destroyed or
stolen Note shall be deemed to evidence the same debt as the mutilated, lost,
destroyed or stolen Note.

         Preference Claim:  As defined in Section 5.19(b) hereof.

         Proceeding: Any suit in equity, action at law or other judicial or
administrative proceeding.

         Rating Agency: Each of Moody's and Standard & Poor's, so long as such
Persons maintain a rating on the Notes; and if either Moody's or Standard &
Poor's no longer maintains a rating on the Notes, such other nationally
recognized statistical rating organization selected by the Seller and (so long
as an Insurer Default shall not have occurred and be continuing) acceptable to
the Insurer.

         Rating Agency Condition: With respect to any action, that each Rating
Agency shall have been given 10 days' (or such shorter period as shall be
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Seller, the Servicer, the Insurer, the
Indenture Trustee, the Owner Trustee and the Trust in writing that such action
will not result in a reduction or withdrawal of the then current rating of the
Notes.

         Record Date: With respect to a Distribution Date or Redemption Date,
the close of business on the Business Day immediately preceding such
Distribution Date or Redemption Date.

         Redemption Date: In the case of a redemption of the Notes pursuant to
Section 10.1(a) or a payment to Noteholders pursuant to Section 10.1(b), the
Distribution Date specified by the Servicer or the Trust pursuant to Section
10.1(a) or (b) as applicable.

         Redemption Price: (a) In the case of a redemption of the Notes pursuant
to Section 10.1(a), an amount equal to the unpaid principal amount of the then
outstanding principal amount of each class of Notes being redeemed plus accrued
and unpaid interest thereon to but excluding the Redemption Date, or (b) in the
case of a payment made to Noteholders pursuant to Section 10.1(b), the amount on
deposit in the Note Distribution Account, but not in excess of the amount
specified in clause (a) above.

         Responsible Officer: With respect to the Indenture Trustee, the Trust
Collateral Agent or the Owner Trustee (as defined in the Trust Agreement), any
officer within the Corporate Trust Office of the Indenture Trustee or the Owner
Trustee, as the case may be, including any Managing Director, Vice President,
Assistant Vice President, Assistant Treasurer, Assistant Secretary or any other
officer of the Indenture Trustee or the Owner Trustee, as the case may be,
customarily performing functions similar to those performed by any of the above
designated officers, and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject.
<PAGE>

         Sale and Servicing Agreement: The Sale and Servicing Agreement dated as
of June 29, 1997, among the Seller, the Servicer, the Trust and the Trust
Collateral Agent, as the same may be amended or supplemented from time to time
in accordance with the terms thereof.

         Scheduled Payments:  As defined in the Note Policy.

         Service Contract: With respect to a Financed Vehicle, the agreement, if
any, financed under the related Receivable that provides for the repair of such
Financed Vehicle.

         State: Any one of the 50 states of the United States of America or the
District of Columbia.

         Transaction Documents:  As defined in the Insurance Agreement.

         Termination Date: The latest of (i) the expiration of the Note Policy
and the return of the Note Policy to the Insurer for cancellation, (ii) the date
on which the Insurer shall have received payment and performance of all Insurer
Trust Secured obligations, and (iii) the date on which the Indenture Trustee
shall have received payment and performance of all Trustee Trust Secured
Obligations.

         Trust: The party named as such in this Indenture until a successor
replaces it and, thereafter, means the successor and, for purposes of any
provision contained herein and required by the TIA, each other obligor on the
Notes.

         Trust Collateral Agent: Initially, Harris Trust and Savings Bank, in
its capacity as trust collateral agent on behalf of the Trust Secured Parties,
including its successors in interest, until and unless a successor Person shall
have become the Trust Collateral Agent pursuant to Section 6.17 hereof, and
thereafter "Trust Collateral Agent" shall mean such successor Person.

         Trust Indenture Act or TIA: The Trust Indenture Act of 1939, as amended
and as in force on the date hereof, unless otherwise specifically provided.

         Trust Order and Trust Request: A written order or request signed in the
name of the Trust by any one of its Authorized Officers and delivered to the
Indenture Trustee.

         Trust Property: All money, instruments, rights and other property that
are subject or intended to be subject to the lien and security interest of this
Indenture for the benefit of the Noteholders (including all property and
interests Granted to the Trust Collateral Agent), including all proceeds
thereof.
<PAGE>

         Trust Secured Obligations: The Insurer Trust Secured Obligations and
the Trustee Trust Secured Obligations.

         Trust Secured Parties: Each of the Indenture Trustee in respect of the
Trustee Trust Secured Obligations and the Insurer in respect of the Insurer
Trust Secured Obligations.

         Trustee Trust Secured Obligations: All amounts and obligations which
the Trust may at any time owe to or on behalf of the Indenture Trustee for the
benefit of the Noteholders under this Indenture or the Notes.

         UCC: The Uniform Commercial Code, as in effect in the relevant
jurisdiction, as amended from time to time.

         SECTION 1.2 Incorporation by Reference of the Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:

         "Commission" means the Securities and Exchange Commission.

         "indenture securities" means the Notes.

         "indenture security holder" means a Noteholder.

         "indenture to be qualified" means this Indenture.

         "indenture trustee" or "institutional trustee" means the Indenture
Trustee.

         "obligor" on the indenture securities means the Trust.

         All other TIA terms used in this Indenture that are defined by the TIA,
or defined by Commission rule have the meaning assigned to them by such
definitions.

SECTION 1.3       Rules of Construction. Unless the context otherwise requires:

         (i) a term has the meaning assigned to it;

         (ii) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles as in effect
from time to time;

         (iii) "or" is not exclusive;

         (iv) "including" means including without limitation; and

         (v) words in the singular include the plural and words in the plural
include the singular.
<PAGE>

SECTION 1.4 Action by or Consent of Noteholders. Whenever any provision of this
Agreement refers to action to be taken, or consented to, by Noteholders, such
provision shall be deemed to refer to the Noteholder of record as of the Record
Date immediately preceding the date on which such action is to be taken, or
consent given, by Noteholders. Solely for the purposes of any action to be
taken, or consented to, by Noteholders, any Note registered in the name of
National Financial Auto Funding Trust or any Affiliate thereof shall be deemed
not to be outstanding; provided, however, that, solely for the purpose of
determining whether the Indenture Trustee or the Trust Collateral Agent is
entitled to rely upon any such action or consent, only Notes which the Owner
Trustee, the Indenture Trustee or the Trust Collateral Agent, respectively,
knows to be so owned shall be so disregarded.

SECTION 1.5 Material Adverse Effect. Whenever a determination is to be made
under this Agreement as to whether a given event, action, course of conduct or
set of facts or circumstances could or would have a material adverse effect on
the Noteholders (or any similar or analogous determination), such determination
shall be made without taking into account the funds available from claims under
the Policy.

SECTION 1.6 Conflict with TIA. If any provision hereof limits, qualifies or
conflicts with a provision of the TIA that is required under the TIA to be part
of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the TIA that
may be so modified or excluded, the latter provisions shall be deemed to apply
to this Indenture as so modified or to be excluded, as the case may be.

                                   ARTICLE II

                                    THE NOTES


         Form. The Notes, together with the Indenture Trustee's certificate of
authentication, shall be in substantially the form set forth in Exhibit A, with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may, consistently herewith, be determined by the officers executing such
Notes, as evidenced by their execution of the Notes. Any portion of the text of
any Note may be set forth on the reverse thereof, with an appropriate reference
thereto on the face of the Note.

         The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.

         Each Note shall be dated the date of its authentication. The terms of
the Note set forth in Exhibit A are part of the terms of this Indenture.

SECTION 2.2 Execution, Authentication and Delivery. The Notes shall be executed
on behalf of the Trust by any of its Authorized Officers. The signature of any
such Authorized Officer on the Notes may be original or facsimile.
<PAGE>

         Notes bearing the original or facsimile signature of individuals who
were at any time Authorized Officers of the Trust shall bind the Trust,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.

         The Indenture Trustee shall upon receipt of the Note Policy and Trust
Order for authentication and delivery, authenticate and deliver the Notes for
original issue in an aggregate principal amount of $66,891,200. The Notes
outstanding at any time may not exceed such amount except as provided in Section
2.5.

         Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes in the minimum denomination of $20,000 and
in integral multiples of $1,000 in excess thereof.

         No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears attached to such Note
a certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate attached to any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered hereunder.

SECTION 2.3 Temporary Notes. Pending the preparation of Definitive Notes, the
Trust may execute, and upon receipt of a Trust Order the Indenture Trustee shall
authenticate and deliver, temporary Notes which are printed, lithographed,
typewritten, mimeographed or otherwise produced, of the tenor of the Definitive
Notes in lieu of which they are issued and with such variations not inconsistent
with the terms of this Indenture as the officers executing such Notes may
determine, as evidenced by their execution of such Notes.

         If temporary Notes are issued, the Trust will cause Definitive Notes to
be prepared without unreasonable delay. After the preparation of Definitive
Notes, the temporary Notes shall be exchangeable for Definitive Notes upon
surrender of the temporary Notes at the office or agency of the Trust to be
maintained as provided in Section 3.2, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Trust shall
execute and the Indenture Trustee shall authenticate and deliver in exchange
therefor a like principal amount of Definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as Definitive Notes.

SECTION 2.4 Registration; Registration of Transfer and Exchange. The Trust shall
cause to be kept a register (the "Note Register") in which, subject to such
reasonable regulations as it may prescribe, the Trust shall provide for the
registration of Notes and the registration of transfers of Notes. The Indenture
Trustee shall be "Note Registrar" for the purpose of registering Notes and
transfers of Notes as herein provided. Upon any resignation of any Note
Registrar, the Trust shall promptly appoint a successor or, if it elects not to
make such an appointment, assume the duties of Note Registrar.
<PAGE>

         If a Person other than the Indenture Trustee is appointed by the Trust
as Note Registrar, the Trust will give the Indenture Trustee prompt written
notice of the appointment of such Note Registrar and of the location, and any
change in the location, of the Note Register, and the Indenture Trustee shall
have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof. The Indenture Trustee shall have the right to rely
conclusively upon a certificate executed on behalf of the Note Registrar by an
Authorized Officer thereof as to the names and addresses of the Holders of the
Notes and the principal amounts and number of such Notes.

         Upon surrender for registration or transfer of any Note at the office
or agency of the Trust to be maintained as provided in Section 3.2, and if the
requirements of Section 8-401(1) of the UCC are met, the Trust shall execute or
cause the Indenture Trustee to authenticate one or more new Notes, in any
authorized denominations and for the same aggregate principal amount. A
Noteholder may also obtain from the Indenture Trustee, in the name of the
designated transferee or transferees, one or more new Notes in any authorized
denominations and for the same aggregate principal amount. Such requirements
shall not be deemed to create a duty in the Indenture Trustee to monitor the
compliance by the Trust with Section 8-401 of the UCC.

         At the option of the Holder, Notes may be exchanged for other Notes in
any authorized denominations and for the same aggregate principal amount, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange, and if the requirements of Section
8-401(1) of the UCC are met, the Trust shall execute and upon its request the
Indenture Trustee shall authenticate the Notes which the Noteholder making the
exchange is entitled to receive. Such requirements shall not be deemed to create
a duty in the Indenture Trustee to monitor the compliance by the Trust with
Section 8-401 of the UCC.

         All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Trust, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.

         Every Note presented or surrendered for registration of transfer or
exchange shall be (i) duly endorsed by, or be accompanied by a written
instrument of transfer in the form attached to Exhibit A, duly executed by the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar which requirements include membership or
participation in Securities Transfer Agents Medallion Program ("Stamp") or such
other "signature guarantee program" as may be determined by the Note Registrar
in addition to, or in substitution for, Stamp, all in accordance with the
Exchange Act, and (ii) accompanied by such other documents as the Note Registrar
may require.

         The Notes may not be transferred, directly or indirectly, to any Person
that is (i) an employee benefit plan (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), which is subject
to the provisions of Title I of ERISA, (ii) a plan described in section 4975
(e)(1) of the Internal Revenue Code of 1986, as amended, or (iii) an entity
whose underlying assets are deemed to be assets of a plan described in (I) or
(ii) above by reason of such plan's investment in the entity (any such entityt
described in clauses (i) through (iii) , a "Benefit Plan") unless the
acquisition and holding of the Notes by such Benefit Plan is covered by a
Department of Labor Prohibited Transactions Class Exemption ("PTCE"). By
accepting and holding a Note, the Holder thereof shall be deemed to have
represented and warranted that either it is not a Benefit Plan or its
acquisition and holding of the Note is covered by a PTCE.
<PAGE>

         No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Note Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.3 or 9.6 not involving any transfer.

         Notwithstanding, the preceding provisions of this section, the Trust
shall not be required to make, and the Note Registrar shall not register,
transfers or exchanges of Notes selected for redemption for a period of 15 days
preceding the Distribution Date.

SECTION 2. If (i) any mutilated Note is surrendered to the Indenture Trustee, or
the Indenture Trustee receives evidence to its satisfaction of the destruction,
loss or theft of any Note, and (ii) there is delivered to the Indenture Trustee
and the Insurer (unless an Insurer Default shall have occurred and be
continuing) such security or indemnity as may be required by it to hold the
Trust, the Indenture Trustee and the Insurer harmless, then, in the absence of
notice to the Trust, the Note Registrar or the Indenture Trustee that such Note
has been acquired by a bona fide purchaser, and provided that the requirements
of Section 8-405 of the UCC are met, the Trust shall execute and upon its
request the Indenture Trustee shall authenticate and deliver, in exchange for or
in lieu of any such mutilated, destroyed, lost or stolen Note, a replacement
Note (such requirement shall not be deemed to create a duty in the Indenture
Trustee to monitor the compliance by the Trust with Section 8-405); provided,
however, that if any such destroyed, lost or stolen Note, but not a mutilated
Note, shall have become or within seven days shall be due and payable, or shall
have been called for redemption, the Trust may, instead of issuing a replacement
Note, direct the Indenture Trustee, in writing, to pay such destroyed, lost or
stolen Note when so due or payable or upon the Redemption Date without surrender
thereof. If, after the delivery of such replacement Note or payment of a
destroyed, lost or stolen Note pursuant to the proviso to the preceding
sentence, a bona fide purchaser of the original Note in lieu of which such
replacement Note was issued presents for payment such original Note, the Trust,
the Indenture Trustee and the Insurer shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered or
any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Trust or the Indenture Trustee in connection therewith.

         Upon the issuance of any replacement Note under this Section, the Trust
may require the payment by the Holder of such Note of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other reasonable expenses (including the fees and expenses of the Indenture
Trustee) connected therewith.
<PAGE>

         Every replacement Note issued pursuant to this Section in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Trust, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.

         The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.

SECTION 2.6 Persons Deemed Owner. Prior to due presentment for registration of
transfer of any Note, the Trust, the Indenture Trustee and any agent of the
Trust, the Indenture Trustee, the Insurer may treat the Person in whose name any
Note is registered (as of the Record Date) as the owner of such Note for the
purpose of receiving payments of principal of and interest, if any on such Note
and for all other purposes whatsoever, whether or not such Note be overdue, and
none of the Trust, the Insurer, the Indenture Trustee nor any agent of the Trust
or the Indenture Trustee shall be affected by notice to the contrary.

SECTION 2.7 Payment of Principal and Interest; Defaulted Interest. (a) The Notes
shall accrue interest as provided in the Form of Note set forth in Exhibit A and
such interest shall be payable on each Distribution Date as specified therein.
Any installment of interest or principal, if any, payable on any Note which is
punctually paid or duly provided for by the Trust on the applicable Distribution
Date shall be paid to the Person in whose name such Note (or one or more
Predecessor Notes) is registered on the Record Date, by check mailed
first-class, postage prepaid, to such Person's address as it appears on the Note
Register on such Record Date, except that, unless Definitive Notes have been
issued pursuant to Section 2.12, with respect to Notes registered on the Record
Date in the name of the nominee of the Clearing Agency (initially, such nominee
to be Cede & Co.), payment will be made by wire transfer in immediately
available funds to the account designated by such nominee and except for the
final installment of principal payable with respect to such Note on a
Distribution Date or on the Final Scheduled Distribution Date (and except for
the Redemption Price for any Note called for redemption pursuant to Section
10.1(a)) which shall be payable as provided below. The funds represented by any
such checks returned undelivered shall be held in accordance with Section 3.3.


         The principal of the Notes shall be payable in installments on each
Distribution Date as provided in the Form of Note set forth in Exhibit A.
Notwithstanding the foregoing, and subject to Section 5.4, the entire unpaid
principal amount of the Notes shall be due and payable, if not previously paid,
on the date on which an Event of Default shall have occurred and be continuing
and an Insurer Default shall have occurred and be continuing, if the Indenture
Trustee or the Holders of the Notes representing not less than a majority of the
Outstanding Amount of the Notes have declared the Notes to be immediately due
and payable in the manner provided in Section 5.2. Upon written notice from the
Trust, the Indenture Trustee shall notify the Person in whose name a Note is
registered at the close of business on the Record Date preceding the
Distribution Date on which the Trust expects that the final installment of
principal of and interest on such Note will be paid. Such notice shall be mailed
or transmitted by facsimile prior to such final Distribution Date and shall
specify that such final installment will be payable only upon presentation and
surrender of such Note and shall specify the place where such Note may be
presented and surrendered for payment of such installment. Notices in connection
with redemptions of Notes shall be mailed to Noteholders as provided in Section
10.2.
<PAGE>

         (c) If the Trust defaults in a payment of interest on the Notes, the
Trust shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Interest Rate to the extent lawful. The
Trust may pay such defaulted interest to the Persons who are Noteholders on a
subsequent special record date, which date shall be at least five Business Days
prior to the payment date. The Trust shall fix or cause to be fixed any such
special record date and payment date, and, at least 15 days before any such
special record date, the Trust shall mail to each Noteholder and the Indenture
Trustee a notice that states the special record date, the payment date and the
amount of defaulted interest to be paid.

         (d) Promptly following the date on which all principal of and interest
on the Notes has been paid in full and the Notes have been surrendered to the
Indenture Trustee, the Indenture Trustee shall, upon written notice from the
Servicer of the amounts, if any, that the Insurer has paid in respect of the
Notes under the Note Policy or otherwise which has not been reimbursed to it,
deliver such surrendered Notes to the Insurer to the extent not previously
canceled or destroyed.

         SECTION 2.8 Cancellation. Subject to Section 2.7(d), all Notes
surrendered for payment, registration of transfer, exchange or redemption shall,
if surrendered to any Person other than the Indenture Trustee, be delivered to
the Indenture Trustee and shall be promptly canceled by the Indenture Trustee.
Subject to Section 2.7(d), the Trust may at any time deliver to the Indenture
Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Trust may have acquired in any manner whatsoever, and all
Notes so delivered shall be promptly canceled by the Indenture Trustee. No Notes
shall be authenticated in lieu of or in exchange for any Notes canceled as
provided in this Section, except as expressly permitted by this Indenture.
Subject to Section 2.7(d), all canceled Notes maybe held or disposed of by the
Indenture Trustee in accordance with its standard retention or disposal policy
as in effect at the time unless the Trust shall direct by a Trust Order that
they be destroyed or returned to it; provided that such Trust Order is timely
and the Notes have not been previously disposed of by the Indenture Trustee.

SECTION 2.9 Release of Collateral. The Trust Collateral Agent shall, on or after
the Termination Date, release any remaining portion of the Trust Property from
the lien created by this Indenture and deposit in the Collection Account any
funds then on deposit in any other Trust Account. The Trust Collateral Agent
shall release property from the lien created by this Indenture pursuant to this
Section 2.9 only upon receipt of a Trust Request by it and the Indenture Trustee
accompanied by an Officer's Certificate, an Opinion of Counsel and (if required
by the TIA) Independent Certificates in accordance with TIA ss.ss. 314(c) and
314(d)(1) meeting the applicable requirements of Section 11.1.
<PAGE>

SECTION 2.10 Book-Entry Notes. The Notes, upon original issuance, will be issued
in the form of typewritten Notes representing the Book-Entry Notes, to be
delivered to The Depository Trust Company, the initial Clearing Agency, by, or
on behalf of, the Trust. Such Notes shall initially be registered on the Note
Register in the name of Cede & Co., the nominee of the initial Clearing Agency,
and no Note Owner will receive a Definitive Note representing such Note Owner's
interest in such Note, except as provided in Section 2.12. Unless and until
definitive, fully registered Notes (the "Definitive Notes") have been issued to
Note Owners pursuant to Section 2.12:

         (i) the provisions of this Section shall be in full force and effect;

         (ii) the Note Registrar and the Indenture Trustee shall be entitled to
deal with the Clearing Agency for all purposes of this Indenture (including the
payment of principal of and interest on the Notes and the giving of instructions
or directions hereunder) as the sole Holder of the Notes, and shall have no
obligation to the Note Owners;

         (iii) to the extent that the provisions of this Section conflict with
any other provisions of this Indenture, the provisions of this Section shall
control;

         (iv) the rights of Note Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and agreements
between such Note Owners and the Clearing Agency and/or the Clearing Agency
Participants. Unless and until Definitive Notes are issued pursuant to Section
2.12, the initial Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and receive and transmit payments of principal of
and interest on the Notes to such Clearing Agency Participants;

         (v) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Notes evidencing a specified
percentage of the Outstanding Amount of the Notes, the Clearing Agency shall be
deemed to represent such percentage only to the extent that it has received
instructions to such effect from Note Owners and/or Clearing Agency Participants
owning or representing, respectively, such required percentage of the beneficial
interest in the Notes and has delivered such instructions to the Indenture
Trustee; and

         (vi) Note Owners may receive copies of any reports sent to Noteholders
pursuant to this Indenture, upon written request, together with a certification
that they are Note Owners and payment of reproduction and postage expenses
associated with the distribution of such reports, from the Indenture Trustee at
the Corporate Trust Office.
<PAGE>

         SECTION 2.11 Notices to Clearing Agency. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Note Owners pursuant to Section
2.12, the Indenture Trustee shall give all such notices and communications
specified herein to be given to Holders of the Notes to the Clearing Agency, and
shall have no obligation to the Note Owners.

SECTION 2.12 Definitive Notes. If (i) the Servicer advises the Indenture Trustee
in writing that the Clearing Agency is no longer willing or able to properly
discharge its responsibilities with respect to the Notes, and the Servicer is
unable to locate a qualified successor, (ii) the Servicer at its option advises
the Indenture Trustee in writing that it elects to terminate the book-entry
system through the Clearing Agency or (iii) after the occurrence of an Event of
Default, Note Owners representing beneficial interests aggregating at least a
majority of the Outstanding Amount of the Notes advise the Indenture Trustee
through the Clearing Agency in writing that the continuation of a book entry
system through the Clearing Agency is no longer in the best interests of the
Note Owners, then the Clearing Agency shall notify all Note Owners and the
Indenture Trustee of the occurrence of any such event and of the availability of
Definitive Notes to Note Owners requesting the same. Upon surrender to the
Indenture Trustee of the typewritten Note or Notes representing the Book-Entry
Notes by the Clearing Agency, accompanied by registration instructions, the
Trust shall execute and the Indenture Trustee shall authenticate the Definitive
Notes in accordance with the instructions of the Clearing Agency. None of the
Trust, the Note Registrar or the Indenture Trustee shall be liable for any delay
in delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Notes, the Indenture Trustee shall recognize the Holders of the Definitive Notes
as Noteholders.

                                   ARTICLE III

                                    COVENANTS

         Payment of Principal and Interest. The Trust will duly and punctually
pay the principal of and interest on the Notes in accordance with the terms of
the Notes and this Indenture. Without limiting the foregoing, the Trust will
cause to be distributed all amounts on deposit in the Note Distribution Account
on a Distribution Date deposited therein pursuant to the Sale and Servicing
Agreement for the benefit of the Noteholders. Amounts properly withheld under
the Code by any Person from a payment to any Noteholder of interest and/or
principal shall be considered as having been paid by the Trust to such
Noteholder for all purposes of this Indenture.

SECTION 3.2 Maintenance of Office or Agency. The Trust will maintain in New
York, an office or agency where Notes may be surrendered for registration,
transfer or exchange of the Notes, and where notices and demands to or upon the
Trust in respect of the Notes and this Indenture may be served. The Trust hereby
initially appoints the Indenture Trustee to serve as its agent for the foregoing
purposes. The Trust will give prompt written notice to the Indenture Trustee of
the location, and of any change in the location, of any such office or agency.
If at any time the Trust shall fail to maintain any such office or agency or
shall fail to furnish the Indenture Trustee with the address thereof, such
surrenders, notices and demands may be made or served at the Corporate Trust
Office, and the Trust hereby appoints the Indenture Trustee as its agent to
receive all such surrenders, notices and demands.
<PAGE>

SECTION 3.3 Money for Payments to be Held in Trust. On or before each
Distribution Date and Redemption Date, the Trust shall deposit or cause to be
deposited in the Note Distribution Account from the Collection Account an
aggregate sum sufficient to pay the amounts then becoming due under the Notes,
such sum to be held in trust for the benefit of the Persons entitled thereto and
(unless the Note Paying Agent is the Indenture Trustee) shall promptly notify
the Indenture Trustee of its action or failure so to act.

         The Trust will cause each Note Paying Agent other than the Indenture
Trustee to execute and deliver to the Indenture Trustee and the Insurer an
instrument in which such Note Paying Agent shall agree with the Indenture
Trustee (and if the Indenture Trustee acts as Note Paying Agent, it hereby so
agrees), subject to the provisions of this Section, that such Note Paying Agent
will:

         (i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided and pay such sums to such Persons as herein provided;

         (ii) give the Indenture Trustee written notice of any default by the
Trust of which it has actual knowledge (or any other obligor upon the Notes) in
the making of any payment required to be made with respect to the Notes;

         (iii) at any time during the continuance of any such default, upon the
written request of the Indenture Trustee, forthwith pay to the Indenture Trustee
all sums so held in trust by such Note Paying Agent;

         (iv) immediately resign as a Note Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of Notes if at
any time it ceases to meet the standards required to be met by a Note Paying
Agent at the time of its appointment; and

         (v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith.

         The Trust may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Trust
Order direct any Note Paying Agent to pay to the Indenture Trustee all sums held
in trust by such Note Paying Agent, such sums to be held by the Indenture
Trustee upon the same trusts as those upon which the sums were held by such Note
Paying Agent; and upon such a payment by any Note Paying Agent to the Indenture
Trustee, such Note Paying Agent shall be released from all further liability
with respect to such money.
<PAGE>

         Subject to applicable laws with respect to the escheat of funds, any
money held by the Indenture Trustee or any Note Paying Agent in trust for the
payment of any amount due with respect to any Note and remaining unclaimed for
two years after such amount has become due and payable shall be discharged from
such trust and be paid to the Trust on Trust Request, with the consent of the
Insurer (unless an Insurer Default shall have occurred and be continuing) and
shall be deposited by the Indenture Trustee in the Collection Account; and the
Holder of such Note shall thereafter, as an unsecured general creditor, look
only to the Trust for payment thereof (but only to the extent of the amounts so
paid to the Trust), and all liability of the Indenture Trustee or such Note
Paying Agent with respect to such trust money shall thereupon cease; provided,
however, that if such money or any portion thereof had been previously deposited
by the Insurer or the Trust Collateral Agent with the Indenture Trustee for the
payment of principal or interest on the Notes, to the extent any amounts are
owing to the Insurer, such amounts shall be paid promptly to the Insurer upon
receipt of a written request by the Insurer to such effect; and provided,
further, that the Indenture Trustee or such Note Paying Agent, before being
required to make any such repayment, shall at the expense of the Trust cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in The City of New
York, notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the Trust.
The Indenture Trustee shall also adopt and employ, at the expense of the Trust,
any other reasonable means of notification of such repayment (including, but not
limited to, mailing notice of such repayment to Holders whose Notes have been
called but have not been surrendered for redemption or whose right to or
interest in monies due and payable but not claimed is determinable from the
records of the Indenture Trustee or of any Note Paying Agent, at the last
address of record for each such Holder).

SECTION 3.4 Existence. Except as otherwise permitted by the provisions of
Section 3.10, the Trust will keep in full effect its existence, rights and
franchises as a business trust under the laws of the State of Delaware (unless
it becomes, or any successor Trust hereunder is or becomes, organized under the
laws of any other state or of the United States of America, in which case the
Trust will keep in full effect its existence, rights and franchises under the
laws of such other jurisdiction) and will obtain and preserve its qualification
to do business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Indenture, the
Notes, the Collateral and each other instrument or agreement included in the
Trust Property.

SECTION 3.5 Protection of Trust Property. The Trust intends the security
interest Granted pursuant to this Indenture in favor of the Trust Secured
Parties to be prior to all other liens in respect of the Trust Property, and the
Trust shall take all actions necessary to obtain and maintain, in favor of the
Trust Collateral Agent, for the benefit of the Trust Secured Parties, a first
lien on and a first priority, perfected security interest in the Trust Property.
The Trust will from time to time prepare (or shall cause to be prepared),
execute and deliver all such supplements and amendments hereto and all such
financing statements, continuation statements, instruments of further assurance
and other instruments, and will take such other action necessary or advisable
to:
<PAGE>

         (i) Grant more effectively all or any portion of the Trust Property;

         (ii) maintain or preserve the lien and security interest (and the
priority thereof) in favor of the Trust Collateral Agent for the benefit of the
Trust Secured Parties created by this Indenture or carry out more effectively
the purposes hereof; 

         (iii) perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture;

         (iv) enforce any of the Collateral;

         (v) preserve and defend title to the Trust Property and the rights of
the Trust Collateral Agent in such Trust Property against the claims of all
persons and parties; and

         (vi) pay all taxes or assessments levied or assessed upon the Trust
Property when due.

         The Trust hereby designates the Trust Collateral Agent its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required by the Trust Collateral Agent pursuant to this
Section; provided that, such designation shall not be deemed to create a duty in
the Indenture Trustee or the Trust Collateral Agent to monitor the compliance of
the Trust with respect to its duties under this Section 3.5 or the adequacy of
any financing statement, continuation statement or other instrument prepared by
the Trust.

SECTION 3.6 Opinions as to Trust Property. (a) On the Closing Date, the Trust
shall furnish to the Indenture Trustee, the Trust Collateral Agent and the
Insurer an Opinion of Counsel either stating that, in the opinion of such
counsel, such action has been taken with respect to the recording and filing of
this Indenture, any indentures supplemental hereto, and any other requisite
documents, and with respect to the execution and filing of any financing
statements and continuation statements, as are necessary to perfect and make
effective the first priority lien and security interest in favor of the Trust
Collateral Agent, for the benefit of the Trust Secured Parties, created by this
Indenture and reciting the details of such action, or stating that, in the
opinion of such counsel, no such action is necessary to make such lien and
security interest effective.


         Within 90 days after the beginning of each calendar year, beginning
with the first calendar year beginning more than six months after the Closing
Date, the Trust shall furnish to the Indenture Trustee, Trust Collateral Agent
and the Insurer, an Opinion of Counsel either stating that, in the opinion of
such counsel, such action has been taken with respect to the recording, filing,
re-recording and refiling of this Indenture, any indentures supplemental hereto
and any other requisite documents and with respect to the execution and filing
of any financing statements and continuation statements as are necessary to
maintain the lien and security interest created by this Indenture and reciting
the details of such action or stating that in the opinion of such counsel no
such action is necessary to maintain such lien and security interest. Such
Opinion of Counsel shall also describe the recording, filing, re-recording and
refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be required
to maintain the lien and security interest of this Indenture.
<PAGE>

SECTION 3.7 Performance of Obligations; Servicing of Receivables. (a) The Trust
will not take any action and will use its best efforts not to permit any action
to be taken by others that would release any Person from any of such Person's
material covenants or obligations under any instrument or agreement included in
the Trust Property or that would result in the amendment, hypothecation,
subordination, termination or discharge of, or impair the validity or
effectiveness of, any such instrument or agreement, except as ordered by any
bankruptcy or other court or as expressly provided in this Indenture, the
Transaction Documents or such other instrument or agreement.


         The Trust may contract with other Persons acceptable to the Insurer (so
long as no Insurer Default shall have occurred and be continuing) to assist it
in performing its duties under this Indenture, and any performance of such
duties by a Person identified to the Indenture Trustee and the Insurer in an
Officer's Certificate of the Trust shall be deemed to be action taken by the
Trust. Initially, the Trust has contracted with the Servicer to assist the Trust
in performing its duties under this Indenture.


         (c) The Trust will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Transaction
Documents and in the instruments and agreements included in the Trust Property,
including, but not limited, to preparing (or causing to prepared) and filing (or
causing to be filed) all UCC financing statements and continuation statements
required to be filed by the terms of this Indenture and the Sale and Servicing
Agreement in accordance with and within the time periods provided for herein and
therein. Except as otherwise expressly provided therein, the Trust shall not
waive, amend, modify, supplement or terminate any Transaction Document or any
provision thereof without the consent of the Indenture Trustee, the Insurer or
the Holders of at least a majority of the Outstanding Amount of the Notes.

         (d) If a Responsible Officer of the Owner Trustee shall have actual
knowledge of the occurrence of a Servicer Termination Event under the Sale and
Servicing Agreement, the Trust shall promptly notify the Indenture Trustee, the
Trust Collateral Agent, the Insurer and the Rating Agencies thereof in
accordance with Section 11.4, and shall specify in such notice, the action, if
any, the Trust is taking in respect of such default. If a Servicer Termination
Event shall arise from the failure of the Servicer to perform any of its duties
or obligations under the Sale and Servicing Agreement with respect to the
Receivables, the Trust shall take all reasonable steps available to it to remedy
such failure.

         (e) The Trust agrees that it will not waive timely performance or
observance by the Servicer or the Seller of their respective duties under the
Transaction Documents (x) without the prior consent of the Insurer (unless an
Insurer Default shall have occurred and be controlling) or (y) if the effect
thereof would adversely affect the Holders of the Notes.
<PAGE>

         SECTION 3.8 Negative Covenants. So long as any Notes are Outstanding,
the Trust shall not:

         (i) except as expressly permitted by this Indenture or the Transaction
Documents, sell, transfer, exchange or otherwise dispose of any of the
properties or assets of the Trust, including those included in the Trust
Property, unless directed to do so by the Controlling Party;

         (ii) claim any credit on, or make any deduction from the principal or
interest payable in respect of, the Notes (other than amounts properly withheld
from such payments under the Code) or assert any claim against any present or
former Noteholder by reason of the payment of the taxes levied or assessed upon
any part of the Trust Property; or

         (iii) (A) permit the validity or effectiveness of this Indenture to be
impaired, or permit the lien in favor of the Trust Collateral Agent created by
this Indenture to be amended, hypothecated, subordinated, terminated or
discharged, or permit any Person to be released from any covenants or
obligations with respect to the Notes under this Indenture except as may be
expressly permitted hereby, (B) permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance (other than the lien of this Indenture)
to be created on or extend to or otherwise arise upon or burden the Trust
Property or any part thereof or any interest therein or the proceeds thereof
(other than tax liens, mechanics' liens and other liens that arise by operation
of law, in each case on a Financed Vehicle and arising solely as a result of an
action or omission of the related Obligor), (C) permit the lien of this
Indenture not to constitute a valid first priority (other than with respect to
any such tax, mechanics' or other lien) security interest in the Trust Property
or (D) amend, modify or fail to comply with the provisions of the Transaction
Documents without the prior written consent of the Controlling Party.

         SECTION 3.9 Annual Statement as to Compliance. The Trust will deliver
to the Indenture Trustee and the Insurer, within 90 days after the end of each
fiscal year of the Trust (commencing with the fiscal year ended December 31,
1997), and otherwise in compliance with the requirements of TIA ss.314(a)(4) an
Officer's Certificate stating, as to the Authorized Officer signing such
Officer's Certificate, that

         (i) a review of the activities of the Trust during such year and of
performance under this Indenture has been made under such Authorized Officer's
supervision; and

         (ii) to the best of such Authorized Officer's knowledge, based on such
review, the Trust has complied with all conditions and covenants under this
Indenture throughout such year, or, if there has been a default in the
compliance of any such condition or covenant, specifying each such default known
to such Authorized Officer and the nature and status thereof.
<PAGE>
         SECTION 3.10 Trust May Consolidate, Etc. Only on Certain Terms. (a) The
Trust shall not consolidate or merge with or into any other Person.

(a) The Trust shall not convey or transfer all or substantially all of its
properties or assets, including those included in the Trust Property, to any
Person.

SECTION 3.11      [Reserved].

SECTION 3.12 No Other Business. The Trust shall not engage in any business other
than financing, purchasing, owning, selling and managing the Receivables in the
manner contemplated by this Indenture and the Transaction Documents and
activities incidental thereto. After the Pre-Funding Period, the Trust shall not
fund the purchase of any Additional Receivables.

SECTION 3.13 No Borrowing. The Trust shall not issue, incur, assume, guarantee
or otherwise become liable, directly or indirectly, for any Indebtedness except
for (i) the Notes, (ii) obligations owing from time to time to the Insurer under
the Insurance Agreement and (iii) any other Indebtedness permitted by or arising
under the Transaction Documents. The proceeds of the Notes shall be used
exclusively to fund the Trust's purchase of the Receivables and the other assets
specified in the Sale and Servicing Agreement, to fund the Pre-Funding Account
and the Spread Account and to pay the Trust's organizational, transactional and
start-up expenses.

SECTION 3.14 Servicer's Obligations. The Trust shall cause the Servicer to
comply with Sections 4.11, 4.12, 4.13 and 5.10 of the Sale and Servicing
Agreement.

SECTION 3.15 Guarantees, Loans, Advances and Other Liabilities. Except as
contemplated by the Sale and Servicing Agreement or this Indenture, the Trust
shall not make any loan or advance or credit to, or guarantee (directly or
indirectly or by an instrument having the effect of assuring another's payment
or performance on any obligation or capability of so doing or otherwise),
endorse or otherwise become contingently liable, directly or indirectly, in
connection with the obligations, stocks or dividends of, or own, purchase,
repurchase or acquire (or agree contingently to do so) any stock, obligations,
assets or securities of, or any other interest in, or make any capital
contribution to, any other Person.

SECTION 3.16 Capital Expenditures. The Trust shall not make any expenditure (by
long-term or operating lease or otherwise) for capital assets (either realty or
personally).

SECTION 3.17 Compliance with Laws. The Trust shall comply with the requirements
of all applicable laws, the non-compliance with which would, individually or in
the aggregate, materially and adversely affect the ability of the Trust to
perform its obligations under the Notes, this Indenture or any Transaction
Document.
<PAGE>

SECTION 3.18 Restricted Payments. The Trust shall not, directly or indirectly,
(i) pay any dividend or make any distribution (by reduction of capital or
otherwise), whether in cash, property, securities or a combination thereof, to
the Owner Trustee or any owner of a beneficial interest in the Trust or
otherwise with respect to any ownership or equity interest or security in or of
the Trust or to the Servicer, (ii) redeem, purchase, retire or otherwise acquire
for value any such ownership or equity interest or security or (iii) set aside
or otherwise segregate any amounts for any such purpose; provided, however, that
the Trust may make, or cause to be made, distributions to the Servicer, the
Owner Trustee, the Indenture Trustee and the Certificateholders as permitted by,
and to the extent funds are available for such purpose under, the Sale and
Servicing Agreement or Trust Agreement. The Trust will not, directly or
indirectly, make payments to or distributions from the Collection Account except
in accordance with this Indenture and the Transaction Documents.

SECTION 3.19 Notice of Events of Default. Upon a Responsible Officer of the
Owner Trustee having actual knowledge thereof, the Trust agrees to give the
Indenture Trustee, the Insurer and the Rating Agencies prompt written notice of
each Event of Default hereunder and each default on the part of the Servicer or
the Seller of its obligations under the Sale and Servicing Agreement.

SECTION 3.20 Further Instruments and Acts. Upon request of the Indenture Trustee
or the Insurer, the Trust will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.

SECTION 3.21 Amendments of Sale and Servicing Agreement and Trust Agreement. The
Trust shall not agree to any amendment to Section 13.1 of the Sale and Servicing
Agreement or Section 13.1 of the Trust Agreement to eliminate the requirements
thereunder that the Indenture Trustee or the Holders of the Notes consent to
amendments thereto as provided therein.

SECTION 3.22 Income Tax Characterization. For purposes of federal income, state
and local income and franchise and any other income taxes, the Trust will treat
the Notes as indebtedness of the Trust and hereby instructs the Indenture
Trustee to treat the Notes as indebtedness of the Trust for federal and state
tax reporting purposes.

                                   ARTICLE IV

                           SATISFACTION AND DISCHARGE


         Satisfaction and Discharge of Indenture. This Indenture shall cease to
be of further effect with respect to the Notes except as to (i) rights of
registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.3, 3.4, 3.5, 3.8,
3.10, 3.12, 3.13, 3.20, 3.21 and 3.22, (v) the rights, obligations and
immunities of the Indenture Trustee hereunder (including the rights of the
Indenture Trustee under Section 6.7 and the obligations of the Indenture Trustee
under Section 4.2) and (vi) the rights of Noteholders as beneficiaries hereof
with respect to the property so deposited with the Indenture Trustee payable to
all or any of them, and the Indenture Trustee, on demand of and at the expense
of the Trust, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to the Notes, when
<PAGE>
(A)      either

         (1) all Notes theretofore authenticated and delivered (other than (i)
Notes that have been destroyed, lost or stolen and that have been replaced or
paid as provided in Section 2.5 and (ii) Notes for whose payment money has
theretofore been deposited in trust or segregated and held in trust by the Trust
and thereafter repaid to the Trust or discharged from such trust, as provided in
Section 3.3) have been delivered to the Indenture Trustee for cancellation and
the Note Policy has expired and been returned to the Insurer for cancellation;
or

         (2) all Notes not theretofore delivered to the Indenture Trustee for
cancellation

         (i) have become due and payable,

         (ii) will become due and payable on the Final Scheduled Distribution
Date, or


         (iii) are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for the giving of notice of
redemption by the Indenture Trustee in the name, and at the expense, of the
Trust,

                  and the Trust, in the case of (i), (ii) or (iii) above, has
                  irrevocably deposited or caused to be irrevocably deposited
                  with the Trust Collateral Agent cash or direct obligations of
                  or obligations guaranteed by the United States of America
                  (which will mature prior to the date such amounts are
                  payable), in trust for such purpose, in an amount sufficient
                  to pay and discharge the entire indebtedness on such Notes not
                  theretofore delivered to the Indenture Trustee for
                  cancellation when due on the Final Scheduled Distribution Date
                  or Redemption Date (if Notes shall have been called for
                  redemption pursuant to Section 10.1(a)), as the case may be;

         (B) the Trust has paid or caused to be paid all Insurer Trust Secured
Obligations and all Trustee Trust Secured Obligations; and

         (C) the Trust has delivered to the Indenture Trustee, the Trust
Collateral Agent and the Insurer an Officer's Certificate, an Opinion of Counsel
and if required by the TIA, the Indenture Trustee, the Trust Collateral Agent or
the Insurer (so long as an Insurer Default shall not have occurred and be
continuing) an Independent Certificate from a firm of certified public
accountants, each meeting the applicable requirements of Section 11.1(a) and
each stating that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied with. Upon such
satisfaction and discharge, the Indenture Trustee shall give prompt written
notice thereof to each Rating Agency.
<PAGE>

SECTION 4.2 Application of Trust Money. All monies deposited
with the Indenture Trustee pursuant to Section 4.1 hereof shall be held in trust
and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Note Paying Agent, as
the Indenture Trustee may determine, to the Holders of the particular Notes for
the payment or redemption of which such monies have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest; but such monies need not be segregated from other funds except to the
extent required herein or in the Sale and Servicing Agreement or required by
law.

SECTION 4.3 Repayment of Monies Held by Note Paying Agent. In connection with
the satisfaction and discharge of this Indenture with respect to the Notes, all
monies then held by any Note Paying Agent other than the Indenture Trustee under
the provisions of this Indenture with respect to such Notes shall, upon demand
of the Trust, be paid to the Indenture Trustee to be held and applied according
to Section 3.3 and thereupon such Note Paying Agent shall be released from all
further liability with respect to such monies.

                                    ARTICLE V

                                    REMEDIES


         Events of Default. "Event of Default", wherever used herein, means any
one of the following events (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):


         (i) default in the payment of any interest on any Note when the same
becomes due and payable, and such default shall continue for a period of five
days (solely for purposes of this clause, a payment on the Notes funded by the
Insurer or the Collateral Agent pursuant to the Spread Account Agreement shall
be deemed to be a payment made by the Trust); or

         (ii) default in the payment of the principal of or any installment of
the principal of any Note when the same becomes due and payable and such default
shall continue for a period of five days (solely for purposes of this clause, a
payment on the Notes funded by the Insurer or the Collateral Agent pursuant to
the Spread Account Agreement, shall be deemed to be a payment made by the
Trust); or

         (iii) so long as an Insurer Default shall not have occurred and be
continuing, an Insurance Agreement Indenture Cross Default shall have occurred;
provided, however, that the occurrence of an Insurance Agreement Indenture Cross
Default may not form the basis of an Event of Default unless the Insurer shall,
upon prior written notice to the Rating Agencies, have delivered to the Trust
and the Indenture Trustee, and not rescinded, a written notice specifying that
such Insurance Agreement Indenture Cross Default constitutes an Event of Default
under this Indenture; or
<PAGE>

         (iv) default in the observance or performance of any covenant or
agreement of the Trust made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is elsewhere in
this Section specifically dealt with) or in any certificate or other writing
delivered in connection herewith, or any representation or warranty of the Trust
made in this Indenture or in any certificate or other writing delivered pursuant
hereto proving to have been incorrect in any material respect as of the time
when the same shall have been made, and such default shall continue or not be
cured, or the circumstance or condition in respect of which such
misrepresentation or warranty was incorrect shall not have been eliminated or
otherwise cured, for a period of 30 days after there shall have been given, by
registered or certified mail, to the Trust by the Insurer or the Indenture
Trustee or to the Trust, the Indenture Trustee and the Insurer by the Holders of
at least 25% of the Outstanding Amount of the Notes, a written notice specifying
such default or incorrect representation or warranty and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder;
provided, however, so long as an Insurer Default shall not have occurred and be
continuing, the occurrence of any such event described in this clause (iv) may
not form the basis of an Event of Default unless the Insurer shall, upon prior
written notice to the Rating Agencies, have delivered to the Trust and the
Indenture Trustee, and not rescinded, a written notice specifying that any such
event constitutes an Event of Default under this Indenture; or

         (v) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Trust or any substantial part of
the Collateral in an involuntary case under any applicable Federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Trust or for any substantial part of the Collateral, or
ordering the winding-up or liquidation of the Trust's affairs, and such decree
or order shall remain unstayed and in effect for a period of 60 consecutive
days; provided, however, so long as an Insurer Default shall not have occurred
and be continuing, the occurrence of any such event described in this clause (v)
may not form the basis of an Event of Default unless the Insurer shall, upon
prior written notice to the Rating Agencies, have delivered to the Trust and the
Indenture Trustee, and not rescinded, a written notice specifying that any such
event constitutes an Event of Default under this Indenture; or

         (vi) the commencement by the Trust of a voluntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or the consent by the Trust to the entry of an order for
relief in an involuntary case under any such law, or the consent by the Trust to
the appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Trust or for any
substantial part of the Collateral, or the making by the Trust of any general
assignment for the benefit of creditors, or the failure by the Trust generally
to pay its debts as such debts become due, or the taking of action by the Trust
in furtherance of any of the foregoing; provided, however, so long as an Insurer
Default shall not have occurred and be continuing, the occurrence of any such
event described in this clause (vi) may not form the basis of an Event of
Default unless the Insurer shall, upon prior written notice to the Rating
Agencies, have delivered to the Trust and the Indenture Trustee, and not
rescinded, a written notice specifying that any such event constitutes an Event
of Default under this Indenture.
<PAGE>

         The Trust shall deliver to the Indenture Trustee, the Owner Trustee,
the Insurer and each Rating Agency, within five days after the occurrence
thereof, written notice in the form of an Officer's Certificate of any event
which with the giving of notice and the lapse of time would become an Event of
Default under clause (iii), its status and what action the Trust is taking or
proposes to take with respect thereto.

SECTION 5.2 Rights Upon Event of Default. (a) If an Insurer Default shall not
have occurred and be continuing and an Event of Default shall have occurred and
be continuing, the Notes shall become immediately due and payable at par,
together with accrued interest thereon. If an Event of Default shall have
occurred and be continuing, the Controlling Party may exercise any of the
remedies specified in Section 5.4(a). In the event of any acceleration of any
Notes by operation of this Section 5.2, the Indenture Trustee shall continue to
be entitled to make claims under the Note Policy pursuant to the Sale and
Servicing Agreement for Scheduled Payments on the Notes. Payments under the Note
Policy following acceleration of any Notes shall be applied by the Indenture
Trustee:

          FIRST: to Noteholders for amounts due and unpaid on the Notes for
          interest, ratably, without preference or priority of any kind,
          according to the amounts due and payable on the Notes for interest;
          and

          SECOND: to Noteholders for amounts due and unpaid on the Notes for
          principal, ratably, without preference or priority of any kind,
          according to the amounts due and payable on the Notes for principal.


         In the event any Notes are accelerated due to an Event of Default, the
Insurer shall have the right (in addition to its obligation to pay Scheduled
Payments on the Notes in accordance with the Note Policy), but not the
obligation, to make payments under the Note Policy or otherwise of interest and
principal due on such Notes, in whole or in part, on any date or dates following
such acceleration as the Insurer, in its sole discretion, shall elect.


         (c) If an Insurer Default shall have occurred and be continuing and an
Event of Default shall have occurred and be continuing, the Indenture Trustee in
its discretion may, or if so requested in writing by Holders holding Notes
representing not less than a majority of the Outstanding Amount of the Notes,
subject to Section 6.2(f), declare by written notice to the Trust that the Notes
shall become immediately due and payable at par, together with accrued interest
thereon.
<PAGE>

         (d) If an Insurer Default shall have occurred and be continuing, then
at any time after such declaration of acceleration of maturity has been made and
before a judgment or decree for payment of the money due has been obtained by
the Indenture Trustee as hereinafter in this Article V provided, the Holders of
Notes representing a majority of the Outstanding Amount of the Notes, by written
notice to the Trust and the Indenture Trustee, may rescind and annul such
declaration and its consequences if: 

         (i) the Trust has paid or deposited with the Indenture Trustee a sum
sufficient to pay

         (A) all payments of principal of and interest on all Notes and all
other amounts that would then be due hereunder or upon such Notes if the Event
of Default giving rise to such acceleration had not occurred; and

         (B) all sums paid or advanced by the Indenture Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances of the
Indenture Trustee and its agents and counsel; and (ii) all Events of Default,
other than the nonpayment of the principal of the Notes that has become due
solely by such acceleration, have been cured or waived as provided in Section
5.12.

         No such rescission shall affect any subsequent default or impair any
right consequent thereto.

SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Indenture
Trustee. (a) The Trust covenants that if (i) default is made in the payment of
any interest on any Note when the same becomes due and payable (solely for
purposes of this clause, a payment on the Notes funded by the Insurer pursuant
to the Note Policy or the Collateral Agent pursuant to the Spread Account shall
be deemed to be payment made by the Trust), and such default continues for a
period of five days, or (ii) default is made in the payment of the principal of
or any installment of the principal of any Note when the same becomes due and
payable (solely for purposes of this clause, a payment on the Notes funded by
the Insurer pursuant to the Note Policy or the Collateral Agent pursuant to the
Spread Account shall be deemed to be payment made by the Trust), and such
default continues for a period of five days, the Trust will, upon demand of the
Indenture Trustee, pay to it, for the benefit of the Holders of the Notes, the
whole amount then due and payable on such Notes for principal and interest, with
interest upon the overdue principal, and, to the extent payment at such rate of
interest shall be legally enforceable, upon overdue installments of interest, at
the applicable Interest Rate and in addition thereto such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Indenture
Trustee and its agents and counsel.

<PAGE>
         Each Trust Secured Party hereby irrevocably and unconditionally
appoints the Controlling Party as the true and lawful attorney-in-fact of such
Trust Secured Party for so long as such Trust Secured Party is not the
Controlling Party, with full power of substitution, to execute, acknowledge and
deliver any notice, document, certificate, paper, pleading or instrument and to
do in the name of the Controlling Party as well as in the name, place and stead
of such Trust Secured Party such acts, things and deeds for or on behalf of and
in the name of such Trust Secured Party under this Indenture (including
specifically under Section 5.4) and under the Transaction Documents which such
Trust Secured Party could or might do or which may be necessary, desirable or
convenient in such Controlling Party's sole discretion to effect the purposes
contemplated hereunder and under the Transaction Documents and, without
limitation, following the occurrence of an Event of Default, exercise full
right, power and authority to take, or defer from taking, any and all acts with
respect to the administration, maintenance or disposition of the Trust Property.


         (c) If an Event of Default occurs and is continuing, the Indenture
Trustee may in its discretion but with the consent of the Controlling Party and
shall, at the direction of the Controlling Party (except as provided in Section
5.3(d) below), proceed to protect and enforce its rights and the rights of the
Noteholders by such appropriate Proceedings as the Indenture Trustee or the
Controlling Party shall deem most effective to protect and enforce any such
rights, whether for the specific enforcement of any covenant or agreement in
this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy or legal or equitable right vested in the
Indenture Trustee by this Indenture or by law.

         (d) Notwithstanding anything to the contrary contained in this
Indenture (including, without limitation, Sections 5.4(a), 5.12, 5.13 and 5.17)
and regardless of whether an Insurer Default shall have occurred and be
continuing, if the Trust fails to perform its obligations under Section 10.1(b)
hereof when and as due, the Indenture Trustee may in its discretion (and without
the consent of the Controlling Party) proceed to protect and enforce its rights
and the rights of the Noteholders by such appropriate proceedings as the
Indenture Trustee shall deem most effective to protect and enforce any such
rights, whether for specific performance of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy or legal or equitable right vested in the Indenture
Trustee by this Indenture or by law; provided that the Indenture Trustee shall
only be entitled to take any such actions without the consent of the Controlling
Party to the extent such actions (x) are taken only to enforce the Trust's
obligations to redeem the principal amount of Notes and (y) are taken only
against the portion of the Collateral, if any, consisting of the Pre-Funding
Account, any investments therein and any proceeds thereof.

         (e) In case there shall be pending, relative to the Trust or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Property, proceedings under Title 11 of the United States Code or any
other applicable Federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Trust or its property or such other obligor or Person,
or in case of any other comparable judicial proceedings relative to the Trust or
other obligor upon the Notes, or to the creditors or property of the Trust or
such other obligor, the Indenture Trustee, irrespective of whether the principal
of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such proceedings or otherwise:
<PAGE>

         (i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to file such
other papers or documents as may be necessary or advisable in order to have the
claims of the Indenture Trustee (including any claim for reasonable compensation
to the Indenture Trustee and each predecessor Indenture Trustee, and their
respective agents, attorneys and counsel, and for reimbursement of all expenses
and liabilities incurred, and all advances made, by the Indenture Trustee and
each predecessor Indenture Trustee, except as a result of negligence, bad faith
or willful misconduct) and of the Noteholders allowed in such proceedings;

         (ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Notes in any election of a trustee, a standby trustee
or person performing similar functions in any such proceedings;

         (iii) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute all amounts received with
respect to the claims of the Noteholders and of the Indenture Trustee on their
behalf; and

         (iv) to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Indenture Trustee
or the Holders of Notes allowed in any judicial proceedings relative to the
Trust, its creditors and its property; 

and any trustee, receiver, liquidator, custodian or other similar official in
any such proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad faith.

         (f) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar person.

         (g) All rights of action and of asserting claims under this Indenture,
the Spread Account Agreement or under any of the Notes, may be enforced by the
Indenture Trustee without the possession of any of the Notes or the production
thereof in any trial or other proceedings relative thereto, and any such action
or proceedings instituted by the Indenture Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment, subject to
the payment of the expenses, disbursements and compensation of the Indenture
Trustee, each predecessor Indenture Trustee and their respective agents and
attorneys, shall be for the ratable benefit of the Holders of the Notes.
<PAGE>

         (h) In any proceedings brought by the Indenture Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture or
the Spread Account Agreement), the Indenture Trustee shall be held to represent
all the Holders of the Notes, and it shall not be necessary to make any
Noteholder a party to any such proceedings.

         SECTION 5.4 Remedies. (a) If an Event of Default shall have occurred
and be continuing, the Controlling Party may do one or more of the following
(subject to Section 5.5):

         (i) institute Proceedings in its own name and as trustee of an express
trust for the collection of all amounts then payable on the Notes or under this
Indenture with respect thereto, whether by declaration or otherwise, enforce any
judgment obtained, and collect from the Trust and any other obligor upon such
Notes monies adjudged due;

         (ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Property;

         (iii) exercise any remedies of a secured party under the UCC and take
any other appropriate action to protect and enforce the rights and remedies of
the Trust Secured Parties; and

         (iv) direct the Trust Collateral Agent in writing to sell the Trust
Property or any portion thereof or rights or interest therein, at one or more
public or private sales called and conducted in any manner permitted by law;
provided, however, that

         (A) if the Insurer is the Controlling Party, the Insurer may not sell
or otherwise liquidate the Trust Property following an Insurance Agreement
Indenture Cross Default unless

         (I) such Insurance Agreement Indenture Cross Default arises from a
claim being made on the Note Policy or from the insolvency of the Trust or the
Seller, or

         (II) the proceeds of such sale or liquidation distributable to the
Noteholders are sufficient to discharge in full all amounts then due and unpaid
upon such Notes for principal and interest; or

         (B) if the Indenture Trustee is the Controlling Party, the Indenture
Trustee may not sell or otherwise liquidate the Trust Property following an
Event of Default unless

         (I) such Event of Default is of the type described in Section 5.01(i)
or (ii), or
<PAGE>

         (II) either 

                    (x) the Holders of 100% of the Outstanding Amount of the
                    Notes consent thereto,

                    (y) the proceeds of such sale or liquidation distributable
                    to the Noteholders are sufficient to discharge in full all
                    amounts then due and unpaid upon such Notes for principal
                    and interest, or

                    (z) the Indenture Trustee determines that the Trust Property
                    will not continue to provide sufficient funds for the
                    payment of principal of and interest on the Notes as they
                    would have become due if the Notes had not been declared due
                    and payable, and the Indenture Trustee provides prior
                    written notice to the Rating Agencies and obtains the
                    consent of Holders of 66-2/3% of the Outstanding Amount of
                    the Notes.

         In determining such sufficiency or insufficiency with respect to clause
(y) and (z), the Indenture Trustee may, but need not, obtain and rely
conclusively upon an opinion of an Independent investment banking or accounting
firm of national reputation as to the feasibility of such proposed action and as
to the sufficiency of the Trust Property for such purpose.

SECTION 5.5 Optional Preservation of the Receivables. If the Indenture Trustee
is the Controlling Party and if the Notes have been declared to be due and
payable under Section 5.2 following an Event of Default and such declaration and
its consequences have not been rescinded and annulled, the Indenture Trustee
may, but need not, elect to direct the Trust Collateral Agent to maintain
possession of the Trust Property. It is the desire of the parties hereto and the
Noteholders that there be at all times sufficient funds for the payment of
principal of and interest on the Notes, and the Indenture Trustee shall take
such desire into account when determining whether or not to direct the Trust
Collateral Agent to maintain possession of the Trust Property. In determining
whether to direct the Trust Collateral Agent to maintain possession of the Trust
Property, the Indenture Trustee may, but need not, obtain and rely conclusively
upon an opinion of an Independent investment banking or accounting firm of
national reputation as to the feasibility of such proposed action and as to the
sufficiency of the Trust Property for such purpose which opinion shall be at the
expense of the Trust.

SECTION 5.6       Priorities.

(a) Following (1) the acceleration of the Notes pursuant to Section 5.2 or (2)
if an Insurer Default shall have occurred and be continuing, the occurrence of
an Event of Default pursuant to Section 5.1(i), 5.1(ii), 5.1(iii), 5.1(v) or
5.1(vi) of the Indenture or (3) the receipt of Insolvency Proceeds pursuant to
Section 11.1(b) of the Sale and Servicing Agreement, the Distribution Amount,
including any money or property collected pursuant to Section 5.4 of the
Indenture and any such Insolvency Proceeds, shall be applied by the Trust
Collateral Agent on the related Distribution Date in the following order of
priority:
<PAGE>
                    FIRST: amounts due and owing and required to be distributed
                    to the Servicer, the Owner Trustee, the Indenture Trustee,
                    the Collateral Agent and the Trust Collateral Agent,
                    respectively, pursuant to priorities (i) and (ii) of Section
                    5.7(b) of the Sale and Servicing Agreement and to the
                    Indenture Trustee and Trust Collateral Agent pursuant to
                    Section 6.7 hereof, and not previously distributed, in the
                    order of such priorities and without preference or priority
                    of any kind within such priorities;

                    SECOND: to Noteholders for amounts due and unpaid on the
                    Notes for interest, ratably, without preference or priority
                    of any kind, according to the amounts due and payable on the
                    Notes for interest;

                    THIRD: to Noteholders for amounts due and unpaid on the
                    Notes for principal, ratably, without preference or priority
                    of any kind, according to the amounts due and payable on the
                    Notes for principal;

                    FOURTH: to the Insurer, to the extent of any amounts owing
                    to the Insurer under the Insurance Agreement and not paid;

                    FIFTH: to the Collateral Agent to be applied as provided in
                    the Spread Account Agreement;

                    SIXTH: to the Certificateholders, any remaining Available
                    Funds;

provided that any amounts collected from the Pre-Funding Account shall be paid,
first, for amounts due and unpaid on the Notes for principal and interest, if
any, for distribution to Noteholders in accordance with Section 10.1(b) and,
second, in accordance with priorities FIRST through SIXTH above.

(b) The Indenture Trustee may fix a record date and payment date for any payment
to Noteholders pursuant to this Section. At least 15 days before such record
date the Trust shall mail to each Noteholder and the Indenture Trustee a notice
that states the record date, the payment date and the amount to be paid.

SECTION 5.7 Limitation of Suits. No Holder of any Note shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:

         (i) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
<PAGE>

         (ii) the Holders of not less than 25% of the Outstanding Amount of the
Notes have made written request to the Indenture Trustee to institute such
proceeding in respect of such Event of Default in its own name as Indenture
Trustee hereunder;

         (iii) such Holder or Holders have offered to the Indenture Trustee
indemnity reasonably satisfactory to it against the costs, expenses (including
legal fees and expenses) and liabilities to be incurred in complying with such
request;

         (iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such proceedings;

         (v) no direction inconsistent with such written request has been given
to the Indenture Trustee during such 60-day period by the Holders of a majority
of the Outstanding Amount of the Notes; and

         (vi) an Insurer Default shall have occurred and be continuing;

it being understood and intended that no Holders of Notes
shall have any right in any manner whatsoever by virtue of, or by availing of,
any provision of this Indenture to affect, disturb or prejudice the rights of
any other Holders of Notes or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this Indenture,
except in the manner herein provided.

         In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Outstanding Amount of the Notes,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.

SECTION 5.8 Unconditional Rights of Noteholders To Receive Principal and
Interest. Notwithstanding any other provisions in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest, if any, on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture (or, in
the case of redemption, on or after the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Holder.

SECTION 5.9 Restoration of Rights and Remedies. If the Controlling Party or any
Noteholder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, then and in every such case the Trust, the Indenture Trustee and the
Noteholders shall, subject to any determination in such Proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Indenture Trustee and the Noteholders shall
continue as though no such proceeding had been instituted.
<PAGE>

SECTION 5.10 Rights and Remedies Cumulative. No right or remedy herein conferred
upon or reserved to the Controlling Party or to the Noteholders is intended to
be exclusive of any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to every other right
and remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.

SECTION 5.11 Delay or Omission Not a Waiver. No delay or omission of the
Controlling Party or any Holder of any Note to exercise any right or remedy
accruing upon any Default or Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Indenture Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Indenture Trustee or by
the Noteholders, as the case may be.

SECTION 5.12 Control by Noteholders. If the Indenture Trustee is the Controlling
Party, the Holders of a majority of the Outstanding Amount of the Notes shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Indenture Trustee with respect to the Notes or
exercising any trust or power conferred on the Indenture Trustee; provided that

         (i) such direction shall not be in conflict with any rule of law or
with this Indenture;

         (ii) subject to the express terms of Section 5.4, any direction to the
Indenture Trustee to sell or liquidate the Trust Property shall be by the
Holders of Notes representing not less than 100% of the Outstanding Amount of
the Notes;

         (iii) the Noteholders shall provide indemnity satisfactory to the
Indenture Trustee against any and all loss, liability or expense incurred by it
in connection with its performance of its duties under this Section 5.12;

         (iv) if the conditions set forth in Section 5.5 have been satisfied and
the Indenture Trustee elects to retain the Trust Property pursuant to such
Section, then any direction to the Indenture Trustee by Holders of Notes
representing less than 100% of the Outstanding Amount of the Notes to sell or
liquidate the Trust Property shall be of no force and effect; and

         (v) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee that is not inconsistent with such direction;

provided, however, that, subject to Section 6.1, the Indenture
Trustee need not take any action that it determines might involve it in
liability or might materially adversely affect the rights of any Noteholders not
consenting to such action.
<PAGE>

SECTION 5.13 Waiver of Past Defaults. If an Insurer Default shall have occurred
and be continuing, prior to the declaration of the acceleration of the maturity
of the Notes as provided in Section 5.4, the Holders of Notes of not less than a
majority of the Outstanding Amount of the Notes may waive any past Default or
Event of Default and its consequences except a Default (a) in payment of
principal of or interest on any of the Notes or (b) in respect of a covenant or
provision hereof which cannot be modified or amended without the consent of the
Holder of each Note. In the case of any such waiver, the Trust, the Indenture
Trustee and the Holders of the Notes shall be restored to their former positions
and rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereto.

         Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.

SECTION 5.14 Undertaking for Costs. All parties to this Indenture agree, and
each Holder of any Note by such Holder's acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder for
the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).

SECTION 5.15 Waiver of Stay or Extension Laws. The Trust covenants (to the
extent that it may lawfully do so) that it will not at anytime insist upon, or
plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Trust (to the extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Indenture
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.

SECTION 5.16 Action on Notes. The Indenture Trustee's right to seek and recover
judgment on the Notes or under this Indenture shall not be affected by the
seeking, obtaining or application of any other relief under or with respect to
this Indenture. Neither the lien of this Indenture nor any rights or remedies of
the Indenture Trustee or the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Trust or by the levy of any
execution under such judgment upon any portion of the Trust Property or upon any
of the assets of the Trust.
<PAGE>

SECTION 5.17 Performance and Enforcement of Certain Obligations. (a) Promptly
following a request from the Indenture Trustee to do so and at the Servicer's
expense, the Trust agrees to take all such lawful action as the Indenture
Trustee may request to compel or secure the performance and observance by the
Seller and the Servicer, as applicable, of each of their obligations to the
Trust under or in connection with the Sale and Servicing Agreement in accordance
with the terms thereof, and to exercise any and all rights, remedies, powers and
privileges lawfully available to the Trust under or in connection with the Sale
and Servicing Agreement to the extent and in the manner directed by the
Indenture Trustee, including the transmission of notices of default on the part
of the Seller or the Servicer thereunder and the institution of legal or
administrative actions or proceedings to compel or secure performance by the
Seller or the Servicer of each of their obligations under the Sale and Servicing
Agreement.


                  If the Indenture Trustee is a Controlling Party and if an
Event of Default has occurred and is continuing, the Indenture Trustee may, and,
at the written direction of the Holders of 66-2/3% of the Outstanding Amount of
the Notes shall, exercise all rights, remedies, powers, privileges and claims of
the Trust against the Seller or the Servicer under or in connection with the
Sale and Servicing Agreement, including the right or power to take any action to
compel or secure performance or observance by the Seller or the Servicer of each
of their obligations to the Trust thereunder and to give any consent, request,
notice, direction, approval, extension or waiver under the Sale and Servicing
Agreement, and any right of the Trust to take such action shall be suspended.


SECTION 5.18 Subrogation. The Trust Collateral Agent shall (i) receive as
attorney-in-fact of each Noteholder any Note Policy Claim Amount from the
Insurer and (ii) deposit the same in the Note Distribution Account for
distribution to Noteholders. Any and all Note Policy Claim Amounts disbursed by
the Indenture Trustee from claims made under the Note Policy shall not be
considered payment by the Trust or from the Spread Account with respect to such
Notes, and shall not discharge the obligations of the Trust with respect
thereto. The Insurer shall, to the extent it makes any payment with respect to
the Notes, become subrogated to the rights of the recipient of such payments to
the extent of such payments. Subject to and conditioned upon any payment with
respect to the Notes by or on behalf of the Insurer, the Indenture Trustee shall
assign to the Insurer all rights to the payment of interest or principal with
respect to the Notes which are then due for payment to the extent of all
payments made by the Insurer, and the Insurer may exercise any option, vote
right, power or the like with respect to the Notes to the extent that it has
made payment pursuant to the Note Policy. To evidence such subrogation, the Note
Registrar shall note the Insurer's rights as subrogee upon the register of
Noteholders upon receipt from the Insurer of proof of payment by the Insurer of
any Noteholders' Interest Distributable Amount or Noteholders' Principal
Distributable Amount. The foregoing subrogation shall in all cases be subject to
the rights of the Noteholders to receive all Scheduled Payments in respect of
the Notes.
<PAGE>

SECTION 5.19      Preference Claims.

(a) In the event that the Indenture Trustee has received a certified copy of an
order of the appropriate court that any Scheduled Payment (as defined in the
Note Policy) paid on a Note has been avoided in whole or in part as a preference
payment under applicable bankruptcy law, the Indenture Trustee shall so notify
the Insurer, shall comply with the provisions of the Note Policy to obtain
payment by the Insurer of such avoided payment, and shall, at the time it
provides notice to the Insurer, notify Holders of the Notes by mail that, in the
event that any Noteholder's payment is so recoverable, such Noteholder will be
entitled to payment pursuant to the terms of the Note Policy. The Indenture
Trustee shall furnish to the Insurer at its written request, the requested
records it holds in its possession evidencing the payments of principal of and
interest on Notes, if any, which have been made by the Indenture Trustee and
subsequently recovered from Noteholders, and the dates on which such payments
were made. Pursuant to the terms of the Note Policy, the Insurer will make such
payment on behalf of the Noteholder to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order (as defined in
the Note Policy) and not to the Indenture Trustee or any Noteholder directly
(unless a Noteholder has previously paid such payment to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy, in which case the
Insurer will make such payment to the Indenture Trustee for distribution to such
Noteholder upon proof of such payment reasonably satisfactory to the Insurer).

(b) The Indenture Trustee shall promptly notify the Insurer of any proceeding or
the institution of any action (of which the Indenture Trustee has actual
knowledge) seeking the avoidance as a preferential transfer under applicable
bankruptcy, insolvency, receivership, rehabilitation or similar law (a
"Preference Claim") of any distribution made with respect to the Notes. Each
Holder, by its purchase of Notes, and the Indenture Trustee hereby agree that so
long as an Insurer Default shall not have occurred and be continuing, the
Insurer may at any time during the continuation of any proceeding relating to a
Preference Claim direct all matters relating to such Preference Claim including,
without limitation, (i) the direction of any appeal of any order relating to any
Preference Claim and (ii) the posting of any surety, supersede as or performance
bond pending any such appeal at the expense of the Insurer, but subject to
reimbursement as provided in the Insurance Agreement. In addition, and without
limitation of the foregoing, as set forth in Section 5.18(c), the Insurer shall
be subrogated to, and each Noteholder and the Indenture Trustee hereby delegate
and assign, to the fullest extent permitted by law, the rights of the Indenture
Trustee and each Noteholder in the conduct of any proceeding with respect to a
Preference Claim, including, without limitation, all rights of any party to an
adversary proceeding action with respect to any court order issued in connection
with any such Preference Claim.

                                   ARTICLE VI

              THE INDENTURE TRUSTEE AND THE TRUST COLLATERAL AGENT

         Duties of Indenture Trustee. (a) If an Event of Default has occurred
and is continuing, of which a Responsible Officer of the Indenture Trustee and
the Trust Collateral Agent, as the case may be, has actual knowledge, then the
Indenture Trustee or the Trust Collateral Agent, as the case may be, shall
exercise the rights and powers vested in it by this Indenture and the
Transaction Documents and use the same degree of care and skill in its exercise
as a prudent person would exercise or use under the circumstances in the conduct
of such person's own affairs.
<PAGE>
                  Except during the continuance of an above-mentioned Event of
Default:

         (i) each of the Indenture Trustee and the Trust Collateral Agent
undertakes to perform such duties and only such duties as are specifically set
forth in this Indenture and no implied covenants or obligations shall be read
into this Indenture against the Indenture Trustee and the Trust Collateral
Agent, respectively; and

         (ii) in the absence of bad faith on its part, each of the Indenture
Trustee and the Trust Collateral Agent may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Indenture Trustee or the Trust
Collateral Agent, as the case may be and conforming to the requirements of this
Indenture; however, the Indenture Trustee and the Trust Collateral Agent shall
examine the certificates and opinions to determine whether or not they conform
on their face to the requirements of this Indenture.

         (c) Each of the Indenture Trustee and the Trust Collateral Agent may
not be relieved from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that:

         (i) this paragraph does not limit the effect of paragraph (b) of this
Section;

         (ii) each of the Indenture Trustee and the Trust Collateral Agent shall
not be liable for any error of judgment made in good faith by a Responsible
Officer unless it is proved that the Indenture Trustee or the Trust Collateral
Agent was negligent in ascertaining the pertinent facts; and

         (iii) each of the Indenture Trustee and the Trust Collateral Agent
shall not be liable with respect to any action it takes or omits to take in good
faith in accordance with a direction received by it pursuant to Section 5.12.

         (d) The Indenture Trustee and the Trust Collateral Agent shall not be
liable for interest on any money received by it except as the Indenture Trustee
may agree in writing with the Trust.

         (e) Money held in trust by the Indenture Trustee or the Trust
Collateral Agent need not be segregated from other funds except to the extent
required by law or the terms of this Indenture or the Sale and Servicing
Agreement.
<PAGE>

         (f) No provision of this Indenture shall require the Indenture Trustee
or the Trust Collateral Agent to expend or risk its own funds or otherwise incur
financial liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers, if it shall have reasonable grounds to
believe that repayment of such funds or indemnity reasonably satisfactory to it
against such risk or liability is not reasonably assured to it.

         (g) Every provision of this Indenture relating to the conductor
affecting the liability of or affording protection to the Indenture Trustee or
the Trust Collateral Agent shall be subject to the provisions of this Section
and to the provisions of the TIA.

         (h) The Indenture Trustee or the Trust Collateral Agent shall, upon two
Business Day's prior written notice to the Indenture Trustee or the Trust
Collateral Agent, as the case may be, permit any representative of the Insurer,
during the Indenture Trustee's or the Trust Collateral Agent, as the case may
be, normal business hours, to examine all books of account, records, reports and
other papers of the Indenture Trustee or the Trust Collateral Agent, as the case
may be, relating to the Notes, to make copies and extracts therefrom and to
discuss the Indenture Trustee's or the Trust Collateral Agent's affairs and
actions, as such affairs and actions relate to the Indenture Trustee's or the
Trust Collateral Agent's duties with respect to the Notes, with the Indenture
Trustee's or the Trust Collateral Agent's officers and employees responsible for
carrying out the Indenture Trustee's or the Trust Collateral Agent's duties with
respect to the Notes at the sole cost and expense of the Trust.

         (i) The Indenture Trustee shall, and hereby agrees that it will, hold
the Note Policy in trust, and will hold any proceeds of any claim on the Note
Policy in trust solely for the use and benefit of the Noteholders.

         (j) Without limiting the generality of this Section 6.1, the Indenture
Trustee shall have no duty (i) to see to any recording, filing or depositing of
this Indenture or any agreement referred to herein or any financing statement
evidencing a security interest in the Financed Vehicles, or to see to the
maintenance of any such recording or filing or depositing or to any recording,
refiling or redepositing of any thereof, (ii) to see to any insurance of the
Financed Vehicles or Obligors or to effect or maintain any such insurance, (iii)
to see to the payment or discharge of any tax, assessment or other governmental
charge or any Lien or encumbrance of any kind owing with respect to, assessed or
levied against any part of the Trust, (iv) to confirm or verify the contents of
any reports or certificates delivered to the Indenture Trustee pursuant to this
Indenture or the Sale and Servicing Agreement believed by the Indenture Trustee
to be genuine and to have been signed or presented by the proper party or
parties, or (v) to inspect the Financed Vehicles at any time or ascertain or
inquire as to the performance of observance of any of the Trust's, the Seller's
or the Servicer's representations, warranties or covenants or the Servicer's
duties and obligations as Servicer and as custodian of the Receivable Files
under the Sale and Servicing Agreement.
<PAGE>

         (k) In no event shall Harris Trust and Savings Bank, in any of its
capacities hereunder, be deemed to have assumed any duties of the Owner Trustee
under the Delaware Business Trust Statute, common law, or the Trust Agreement.

         SECTION 6.2 Rights of Indenture Trustee and the Trust Collateral Agent.
(a) The Indenture Trustee and the Trust Collateral Agent may rely conclusively
on any document believed by it to be genuine and to have been signed or
presented by the proper person. The Indenture Trustee and the Trust Collateral
Agent need not investigate any fact or matter stated in the document.


         Before the Indenture Trustee or the Trust Collateral Agent acts or
refrains from acting, it may require an Officer's Certificate or an Opinion of
Counsel. The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such Officer's Certificate or Opinion
of Counsel.


         (c) The Indenture Trustee or the Trust Collateral Agent may execute any
of the trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys or a custodian or nominee, and the
Indenture Trustee or the Trust Collateral Agent shall not be responsible for any
misconduct or negligence on the part of, or for the supervision of, NAFI,
including in its capacity as Servicer, or any other such agent, attorney,
custodian or nominee appointed with due care by it hereunder.

         (d) The Indenture Trustee or the Trust Collateral Agent shall not be
liable for any action it takes or omits to take in good faith which it believes
to be authorized or within its rights or powers; provided, however, that the
Indenture Trustee's or the Trust Collateral Agent's conduct does not constitute
willful misconduct, negligence or bad faith.

         (e) The Indenture Trustee and the Trust Collateral Agent may consult
with counsel, and the advice or opinion of counsel with respect to legal matters
relating to this Indenture and the Notes shall be full and complete
authorization and protection from liability in respect to any action taken,
omitted or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.

         (f) The Indenture Trustee and the Trust Collateral Agent shall be under
no obligation to institute, conduct, defend any litigation or take any action
under this Indenture or in relation to this Indenture, at the request, order or
direction of any of the Holders of Notes or the Controlling Party, pursuant to
the provisions of this Indenture, unless such Holders of Notes or the
Controlling Party shall have offered to the Indenture Trustee and the Trust
Collateral Agent reasonable security or indemnity against the costs, expenses
and liabilities that may be incurred therein or thereby; provided, however that
the Indenture Trustee and the Trust Collateral Agent shall, upon the occurrence
of an Event of Default (that has not been cured), exercise the rights and powers
vested in it by this Indenture and the Transaction Documents and use the same
degree of care and skill in its exercise as a prudent person would exercise or
use under the circumstances in the conduct of such person's own affairs.
<PAGE>

         (g) The Indenture Trustee and the Trust Collateral Agent shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or document, unless
requested in writing to do so by the Insurer (so long as no Insurer Default
shall have occurred and be continuing) or (if an Insurer Default shall have
occurred and be continuing) by the Holders of Notes evidencing not less than 25%
of the Outstanding Amount thereof; provided, however, that if the payment within
a reasonable time to the Indenture Trustee and the Trust Collateral Agent of the
costs, expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Indenture Trustee or the Trust
Collateral Agent, not reasonably assured to the Indenture Trustee or the Trust
Collateral Agent by the security afforded to it by the terms of this Indenture
or the Sale and Servicing Agreement, the Indenture Trustee or the Trust
Collateral Agent may require indemnity reasonably satisfactory to it against
such cost, expense (including legal fees and expenses) or liability as a
condition to such proceeding; the reasonable expense of every such examination
shall be paid by the Person making such request, or, if paid by the Indenture
Trustee or the Trust Collateral Agent, shall be reimbursed by the Person making
such request upon demand.

SECTION 6.3 Individual Rights of Indenture Trustee. The Indenture Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Trust or its Affiliates with the same rights it
would have if it were not Indenture Trustee. Any Note Paying Agent, Note
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Indenture Trustee must comply with Sections 6.11 and 6.12.

SECTION 6.4 Indenture Trustee's Disclaimer. Each of the Indenture Trustee and
the Trust Collateral Agent shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture, the Trust
Property or the Notes, it shall not be accountable for the Trust's use of the
proceeds from the Notes, and it shall not be responsible for any statement of
the Trust in the Indenture or in any document issued in connection with the sale
of the Notes or in the Notes other than the Indenture Trustee's certificate of
authentication.

SECTION 6.5 Notice of Defaults. If an Event of Default occurs and is continuing
and if it is either actually known by, or written notice of the existence
thereof has been delivered to, a Responsible Officer of the Indenture Trustee,
the Indenture Trustee shall mail to each Noteholder notice of the Default within
90 days after such knowledge or notice occurs. Except in the case of a Default
in payment of principal of or interest on any Note (including payments pursuant
to the mandatory redemption provisions of such Note), the Indenture Trustee may
withhold the notice if and so long as a Responsible Officer in good faith
determines that withholding the notice is in the interests of Noteholders.

SECTION 6.6 Reports by Indenture Trustee to Holders. Upon written request, the
Note Paying Agent or the Servicer shall on behalf of the Trust deliver to each
Noteholder such information as may be reasonably required to enable such Holder
to prepare its Federal and state income tax returns required by law.

SECTION 6.7 Compensation and Indemnity. (a) Pursuant to Section 5.7(b) of the
Sale and Servicing Agreement and subject to Section 6.18 herein, the Trust
shall, or shall cause the Servicer to, pay to the Indenture Trustee and the
Trust Collateral Agent from time to time compensation for its services. The
Indenture Trustee's and the Trust Collateral Agent's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Trust
shall or shall cause the Servicer to reimburse the Indenture Trustee and the
Trust Collateral Agent for all reasonable out-of-pocket expenses incurred or
<PAGE>

made by it, including costs of collection, in addition to the compensation for
its services. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the Indenture Trustee's and the Trust
Collateral Agent's agents, counsel, accountants and experts. The Trust shall or
shall cause the Servicer to indemnify the Indenture Trustee, the Trust
Collateral Agent and their respective officers, directors, employees and agents
against any and all loss, liability or expense (including attorneys' fees and
expenses) incurred by each of them in connection with the acceptance or the
administration of this trust and the performance of its duties hereunder. The
Indenture Trustee or the Trust Collateral Agent shall notify the Trust and the
Servicer promptly of any claim for which it may seek indemnity. Failure by the
Indenture Trustee or the Trust Collateral Agent to so notify the Trust and the
Servicer shall not relieve the Trust of its obligations hereunder or the
Servicer of its obligations under Article XII of the Sale and Servicing
Agreement. The Trust shall or shall cause the Servicer to defend the claim, the
Indenture Trustee or the Trust Collateral Agent may have separate counsel and
the Trust shall or shall cause the Servicer to pay the fees and expenses of such
counsel. Neither the Trust nor the Servicer need reimburse any expense or
indemnify against any loss, liability or expense incurred by the Indenture
Trustee or the Trust Collateral Agent through the Indenture Trustee's or the
Trust Collateral Agent's own willful misconduct, negligence or bad faith.


                  The Trust's payment obligations to the Indenture Trustee
pursuant to this Section shall survive the discharge of this Indenture or the
earlier resignation or removal of the Indenture Trustee or the Trust Collateral
Agent. When the Indenture Trustee incurs expenses after the occurrence of a
Default specified in Section 5.1(iv) or (v) with respect to the Trust, the
expenses are intended to constitute expenses of administration under Title 11 of
the United States Code or any other applicable Federal or state bankruptcy,
insolvency or similar law. Notwithstanding anything else set forth in this
Indenture or the Transaction Documents, the Indenture Trustee agrees that the
obligations of the Trust (but not the Servicer) to the Indenture Trustee
hereunder and under the Transaction Documents shall be recourse to the Trust
Property only and specifically shall not be recourse to the assets of the Trust
or any Securityholder. In addition, the Indenture Trustee agrees that its
recourse to the Trust, the Trust Property, the Seller and amounts held pursuant
of the Spread Account Agreement shall be limited to the right to receive the
distributions referred to in Section 5.7(b) of the Sale and Servicing Agreement
or Section 3.03 of the Spread Account Agreement.


SECTION 6.8 Replacement of Indenture Trustee. The Indenture Trustee may resign
at any time by so notifying the Trust and the Insurer. The Trust may and, at the
request of the Insurer (unless an Insurer Default shall have occurred and be
continuing) shall, remove the Indenture Trustee, if:

         (i) the Indenture Trustee fails to comply with Section 6.11;

         (ii) a court having jurisdiction in the premises in respect of the
Indenture Trustee in an involuntary case or proceeding under federal or state
banking or bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law, shall
have entered a decree or order granting relief or appointing a receiver,
liquidator, assignee, custodian, trustee, conservator, sequestrator (or similar
official) for the Indenture Trustee or for any substantial part of the Indenture
Trustee's property, or ordering the winding-up or liquidation of the Indenture
Trustee's affairs;
<PAGE>

         (iii) an involuntary case under the federal bankruptcy laws, as now or
hereafter in effect, or another present or future federal or state bankruptcy,
insolvency or similar law is commenced with respect to the Indenture Trustee and
such case is not dismissed within 60 days;

         (iv) the Indenture Trustee commences a voluntary case under any federal
or state banking or bankruptcy laws, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, conservator, sequestrator (or other
similar official) for the Indenture Trustee or for any substantial part of the
Indenture Trustee's property, or makes any assignment for the benefit of
creditors or fails generally to pay its debts as such debts become due or takes
any corporate action in furtherance of any of the foregoing;

         (v) the Indenture Trustee otherwise becomes incapable of acting; or

         (vi) the rating assigned to the long-term unsecured debt obligations of
the Indenture Trustee by the Rating Agencies shall be lowered below the rating
of "BBB", "Baa3" or equivalent rating or be withdrawn by either of the Rating
Agencies.

         If the Indenture Trustee resigns or is removed or if a vacancy exists
in the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Trust
shall promptly appoint a successor Indenture Trustee acceptable to the Insurer
(so long as an Insurer Default shall not have occurred and be continuing). If
the Trust fails to appoint such a successor Indenture Trustee, the Insurer may
appoint a successor Indenture Trustee.

         A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Trust. Thereupon the
resignation or removal of the retiring Indenture Trustee the Insurer (provided
that no Insurer Default shall have occurred and be continuing) shall become
effective, and the successor Indenture Trustee shall have all the rights, powers
and duties of the retiring Indenture Trustee under this Indenture subject to
satisfaction of the Rating Agency Condition. The successor Indenture Trustee
shall mail a notice of its succession to Noteholders. The retiring Indenture
Trustee shall promptly transfer all property held by it as Indenture Trustee to
the successor Indenture Trustee.

         If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Trust or the Holders of a majority in Outstanding Amount
of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
<PAGE>

         If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.

         Any resignation or removal of the Indenture Trustee and appointment of
a successor Indenture Trustee pursuant to any of the provisions of this Section
shall not become effective until acceptance of appointment by the successor
Indenture Trustee pursuant to Section 6.8 and payment of all fees and expenses
owed to the outgoing Indenture Trustee.

         Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Trust's and the Servicer's obligations under Section 6.7 shall
continue for the benefit of the retiring Indenture Trustee.

SECTION 6.9 Successor Indenture Trustee by Merger. If the Indenture Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Indenture Trustee.

         In case at the time such successor or successors by merger, conversion
or consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.

SECTION 6.10 Appointment of Co-Indenture Trustee or Separate Indenture Trustee.
(a) Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirement of any jurisdiction in which any part
of the Trust may at the time be located, the Indenture Trustee with the consent
of the Insurer (so long as an Insurer Default shall not have occurred and be
continuing) shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the Noteholders,
such title to the Trust, or any part hereof, and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trust
as the Indenture Trustee may consider necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 6.11 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 6.8 hereof.

<PAGE>
                  Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:


         (i) all rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee shall be conferred or imposed upon and exercised or
performed by the Indenture Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Indenture Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed the Indenture Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trust or any portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at the
direction of the Indenture Trustee;

         (ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder, including acts or omissions of
predecessor or successor trustees; and

         (iii) the Indenture Trustee may at any time accept the resignation of
or remove any separate trustee or co-trustee.

         (c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.

         (d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, dissolve, become insolvent, become incapable of acting,
resign or be removed, all of its estates, properties, rights, remedies and
trusts shall invest in and be exercised by the Indenture Trustee, to the extent
permitted by law, without the appointment of a new or successor trustee.

         SECTION 6.11 Eligibility: Disqualification. The Indenture Trustee shall
at all times satisfy the requirements of TIA ss.310(a). The Indenture Trustee
shall have a combined capital and surplus of at least $50,000,000 as set forth
in its most recent published annual report of condition and it shall have a long
term debt rating of Baa3 or better by the Rating Agencies. The Indenture Trustee
shall provide copies of such reports to the Insurer upon request. The Indenture
Trustee shall comply with TIA ss.310(b), including the optional provision
permitted by the second sentence of TIA ss.310(b)(9); provided, however, that
there shall be excluded from the operation of TIA ss.310(b)(1) any indenture or
indentures under which other securities of the Trust are outstanding if the
requirements for such exclusion set forth in TIA ss.310(b)(1) are met.
<PAGE>

SECTION 6.12 Preferential Collection of Claims Against Trust. The Indenture
Trustee shall comply with TIA ss.311(a), excluding any creditor relationship
listed in TIA ss.311(b). A Indenture Trustee who has resigned or been removed
shall be subject to TIA ss.311(a) to the extent indicated.

SECTION 6.13 Appointment and Powers. Subject to the terms and conditions hereof,
each of the Trust Secured Parties hereby appoints Harris Trust and Savings Bank
as the Trust Collateral Agent with respect to the Collateral, and Harris Trust
and Savings Bank hereby accepts such appointment and agrees to act as Trust
Collateral Agent with respect to the Indenture Collateral for the Trust Secured
Parties, to maintain custody and possession of such Indenture Collateral (except
as otherwise provided hereunder) and to perform the other duties of the Trust
Collateral Agent in accordance with the provisions of this Indenture and the
other Transaction Documents. Each Trust Secured Party hereby authorizes the
Trust Collateral Agent to take such action on its behalf, and to exercise such
rights, remedies, powers and privileges hereunder, as the Controlling Party may
direct and as are specifically authorized to be exercised by the Trust
Collateral Agent by the terms hereof, together with such actions, rights,
remedies, powers and privileges as are reasonably incidental thereto. The Trust
Collateral Agent shall act upon and in compliance with the written instructions
of the Controlling Party delivered pursuant to this Indenture promptly following
receipt of such written instructions; provided that the Trust Collateral Agent
shall not act in accordance with any instructions (i) which are not authorized
by, or in violation of the provisions of, this Indenture or (ii) for which the
Trust Collateral Agent has not received reasonable indemnity. Receipt of such
instructions shall not be a condition to the exercise by the Trust Collateral
Agent of its express duties hereunder, except where this Indenture provides that
the Trust Collateral Agent is permitted to act only following and in accordance
with such instructions.

SECTION 6.14 Performance of Duties. The Trust Collateral Agent shall have no
duties or responsibilities except those expressly set forth in this Indenture
and the other Transaction Documents to which the Trust Collateral Agent is a
party or as directed by the Controlling Party in accordance with this Indenture.
The Trust Collateral Agent shall not be required to take any discretionary
actions hereunder except at the written direction and with indemnification from
the Controlling Party. The Trust Collateral Agent shall, and hereby agrees that
it will, perform all of the duties and obligations required of it under the Sale
and Servicing Agreement.

SECTION 6.15 Limitation on Liability. Neither the Trust Collateral Agent nor any
of its directors, officers, employees and agents shall be liable for any action
taken or omitted to be taken by it or them hereunder, or in connection herewith,
except that the Trust Collateral Agent shall be liable for its negligence, bad
faith or willful misconduct; nor shall the Trust Collateral Agent be responsible
for the validity, effectiveness, value, sufficiency or enforceability against
the Trust of this Indenture or any of the Indenture Collateral (or any part
thereof). Notwithstanding any term or provision of this Indenture, the Trust
Collateral Agent shall incur no liability to the Trust or the Trust Secured
Parties for any action taken or omitted by the Trust Collateral Agent in
<PAGE>

connection with the Indenture Collateral, except for the negligence, bad faith
or willful misconduct on the part of the Trust Collateral Agent, and, further,
shall incur no liability to the Trust Secured Parties except for negligence, bad
faith or willful misconduct in carrying out its duties to the Trust Secured
Parties. Subject to Section 6.16, the Trust Collateral Agent shall be protected
and shall incur no liability to any such party in conclusively relying upon the
accuracy, acting in reliance upon the contents, and assuming the genuineness of
any notice, demand, certificate, signature, instrument or other document
reasonably believed by the Trust Collateral Agent to be genuine and to have been
duly executed by the appropriate signatory, and (absent actual knowledge to the
contrary) the Trust Collateral Agent shall not be required to make any
independent investigation with respect thereto. The Trust Collateral Agent shall
at all times be free independently to establish to its reasonable satisfaction,
but shall have no duty to independently verify, the existence or nonexistence of
facts that are a condition to the exercise or enforcement of any right or remedy
hereunder or under any of the Transaction Documents. The Trust Collateral Agent
may consult with counsel, and shall not be liable for any action taken or
omitted to be taken by it hereunder in good faith and in accordance with the
advice of such counsel. The Trust Collateral Agent shall not be under any
obligation to exercise any of the remedial rights, obligations or powers vested
in it by this Indenture or to follow any direction from the Controlling Party
unless it shall have received security or indemnity satisfactory to the Trust
Collateral Agent against the costs, expenses and liabilities which might be
incurred by it.

SECTION 6.16 Reliance Upon Documents. In the absence of negligence, bad faith or
willful misconduct on its part, the Trust Collateral Agent shall be entitled to
rely conclusively on any communication, instrument, paper or other document
reasonably believed by it to be genuine and correct and to have been signed or
sent by the proper Person or Persons and shall have no liability in acting, or
omitting to act, where such action or omission to act is in reasonable reliance
upon any statement or opinion contained in any such document or instrument.

SECTION 6.17      Successor Trust Collateral Agent.

(a) Merger. Any Person into which the Trust Collateral Agent may be converted or
merged, or with which it may be consolidated, or to which it may sell or
transfer its trust business and assets as a whole or substantially as a whole,
or any Person resulting from any such conversion, merger, consolidation, sale or
transfer to which the Trust Collateral Agent is a party, shall (provided it is
otherwise qualified to serve as the Trust Collateral Agent hereunder) be and
become a successor Trust Collateral Agent hereunder and be vested with all of
the title to and interest in the Indenture Collateral and all of the trusts,
powers, discretions, immunities, privileges and other matters as was its
predecessor without the execution or filing of any instrument or any further
act, deed or conveyance on the part of any of the parties hereto, anything
herein to the contrary notwithstanding, except to the extent, if any, that any
such action is necessary to perfect, or continue the perfection of, the security
interest of the Trust Secured Parties in the Indenture Collateral; provided that
any such successor shall also be the successor Indenture Trustee under Section
6.9.
<PAGE>

(b) Resignation. The Trust Collateral Agent and any successor Trust Collateral
Agent may resign at any time by so notifying the Trust and the Insurer; provided
that the Trust Collateral Agent shall not so resign unless it shall also resign
as Indenture Trustee hereunder. 

         (c) Removal. Absent a Financial Security Default (as defined in the
Master Spread Account Agreement), the Trust Collateral Agent may be removed by
the Controlling Party at any time (and should be removed at any time that the
Indenture Trustee has been removed), with or without cause, by an instrument or
concurrent instruments in writing delivered to the Trust Collateral Agent, the
other Trust Secured Party and the Trust. A temporary successor may be removed at
any time to allow a successor Trust Collateral Agent to be appointed pursuant to
subsection (d) below. Any removal pursuant to the provisions of this subsection
(c) shall take effect only upon the date which is the latest of (i) the
effective date of the appointment of a successor Trust Collateral Agent and the
acceptance in writing by such successor Trust Collateral Agent of such
appointment and of its obligation to perform its duties hereunder in accordance
with the provisions hereof, and (ii) receipt by the Controlling Party of an
Opinion of Counsel to the effect described in Section 3.6.

         (d) Acceptance by Successor. The Controlling Party shall have the sole
right to appoint each successor Trust Collateral Agent. Every temporary or
permanent successor Trust Collateral Agent appointed hereunder shall execute,
acknowledge and deliver to its predecessor and to the Indenture Trustee, each
Trust Secured Party and the Trust an instrument in writing accepting such
appointment hereunder and the relevant predecessor shall execute, acknowledge
and deliver such other documents and instruments as will effectuate the delivery
of all Indenture Collateral to the successor Trust Collateral Agent, whereupon
such successor, without any further act, deed or conveyance, shall become fully
vested with all the estates, properties, rights, powers, duties and obligations
of its predecessor. Such predecessor shall, nevertheless, on the written request
of either Trust Secured Party or the Trust, execute and deliver an instrument
transferring to such successor all the estates, properties, rights and powers of
such predecessor hereunder. In the event that any instrument in writing from the
Trust or a Trust Secured Party is reasonably required by a successor Trust
Collateral Agent to more fully and certainly vest in such successor the estates,
properties, rights, powers, duties and obligations vested or intended to be
vested hereunder in the Trust Collateral Agent, any and all such written
instruments shall, at the request of the temporary or permanent successor Trust
Collateral Agent, be forthwith executed, acknowledged and delivered by the
Indenture Trustee or the Trust, as the case may be. The designation of any
successor Trust Collateral Agent and the instrument or instruments removing any
Trust Collateral Agent and appointing a successor hereunder, together with all
other instruments provided for herein, shall be maintained with the records
relating to the Indenture Collateral and, to the extent required by applicable
law, filed or recorded by the successor Trust Collateral Agent in each place
where such filing or recording is necessary to effect the transfer of the
Indenture Collateral to the successor Trust Collateral Agent or to protect or
continue the perfection of the security interests granted hereunder.
<PAGE>

         SECTION 6.18 Compensation. The Trust Collateral Agent shall not be
entitled to any compensation for the performance of its duties hereunder other
than the compensation it is entitled to receive in its capacity as Indenture
Trustee. Upon termination of the Indenture Trustee, the Trust Collateral Agent's
duties hereunder shall also terminate.

SECTION 6.19 Representations and Warranties of the Indenture Trustee and the
Trust Collateral Agent. Each of the Trust Collateral Agent and the Indenture
Trustee represents and warrants to the Trust and to each Trust Secured Party as
follows:

         (a) Due Organization. The Indenture Trustee and the Trust Collateral
Agent is a New York banking corporation, duly organized, validly existing and in
good standing under the laws of New York and is duly authorized and licensed
under applicable law to conduct its business as presently conducted.

         (b) Corporate Power. The Indenture Trustee and the Trust Collateral
Agent has all requisite right, power and authority to execute and deliver this
Indenture and to perform all of its duties as the Indenture Trustee or Trust
Collateral Agent, as the case may be, hereunder.

         (c) Due Authorization. The execution and delivery by the Trust
Collateral Agent and the Indenture Trustee of this Indenture and the other
Transaction Documents to which it is a party, and the performance by the Trust
Collateral Agent and the Indenture Trustee of its duties hereunder and
thereunder, have been duly authorized by all necessary corporate proceedings,
are required for the valid execution and delivery by the Trust Collateral Agent
or the Indenture Trustee, or the performance by the Trust Collateral Agent or
the Indenture Trustee, of this Indenture and such other Transaction Documents.

         (d) Valid and Binding Indenture. Each of the Indenture Trustee and the
Trust Collateral Agent has duly executed and delivered this Indenture and each
other Transaction Document to which it is a party, and each of this Indenture
and each such other Transaction Document constitutes the legal, valid and
binding obligation of the Indenture Trustee and the Trust Collateral Agent,
enforceable against the Indenture Trustee and the Trust Collateral Agent in
accordance with its terms, except as (i) such enforceability may be limited by
bankruptcy, insolvency, reorganization and similar laws relating to or affecting
the enforcement of creditors' rights generally and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability.

SECTION 6.20 Waiver of Setoffs. The Indenture Trustee and
the Trust Collateral Agent hereby expressly waives any and all rights of setoff
that the Indenture Trustee or the Trust Collateral Agent may otherwise at any
time have under applicable law with respect to any Account and agrees that
amounts in the Accounts shall at all times be held and applied solely in
accordance with the provisions hereof.

SECTION 6.21 Control by the Controlling Party. The Indenture Trustee and the
Trust Collateral Agent shall comply with notices and instructions given by the
Trust only if accompanied by the written consent of the Controlling Party,
except that if any Event of Default shall have occurred and be continuing, the
Indenture Trustee and the Trust Collateral Agent shall act upon and comply with
notices and instructions given by the Controlling Party alone in the place and
stead of the Trust.
<PAGE>

SECTION 6.22 Compensation. The Trust Collateral Agent shall not be entitled to
any compensation for the performance of its duties hereunder other than the
compensation it is entitled to receive in its capacity as Indenture Trustee.
Upon termination of the Indenture Trustee, the Trust Collateral Agent's duties
hereunder shall also terminate.

                                   ARTICLE VII

                         NOTEHOLDERS' LISTS AND REPORTS

         Trust To Furnish To Indenture Trustee Names and Addresses of
Noteholders. The Trust will furnish or cause to be furnished to the Indenture
Trustee (a) not more than five days after the earlier of (i) each Record Date
and (ii) three months after the last Record Date, a list, in such form as the
Indenture Trustee may reasonably require, of the names and addresses of the
Holders as of such Record Date, (b) at such other times as the Indenture Trustee
may request in writing, within 30 days after receipt by the Trust of any such
request, a list of similar form and content as of a date not more than 10 days
prior to the time such list is furnished; provided, however, that so long as the
Indenture Trustee is the Note Registrar, no such list shall be required to be
furnished. The Indenture Trustee or, if the Indenture Trustee is not the Note
Registrar, the Trust shall furnish to the Insurer in writing upon their written
request and at such other times as the Insurer may request a copy of the list.


SECTION 7.2 Preservation of Information; Communications to Noteholders. (a) The
Indenture Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders contained in the most recent
list furnished to the Indenture Trustee as provided in Section 7.1 and the names
and addresses of Holders received by the Indenture Trustee in its capacity as
Note Registrar. The Indenture Trustee may destroy any list furnished to it as
provided in such Section 7.1 upon receipt of a new list so furnished.


                  Noteholders may communicate pursuant to TIA ss.312(b) with
other Noteholders with respect to their rights under this Indenture or under the
Notes.

         (c) The Trust, the Indenture Trustee and the Note Registrar shall have
the protection of TIA ss.312(c). 

SECTION 7.3 Reports by Trust. (a) The Trust shall:

         (i) file with the Indenture Trustee, within 15 days after the Trust is
required to file the same with the Commission, copies of the annual reports and
copies of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Trust may be required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act;

         (ii) file with the Indenture Trustee and the Commission in accordance
with rules and regulations prescribed from time to time by the Commission such
additional information, documents and reports with respect to compliance by the
Trust with the conditions and covenants of this Indenture as may be required
from time to time by such rules and regulations; and
<PAGE>

         (iii) supply to the Indenture Trustee (and the Indenture Trustee shall
transmit by mail to all Noteholders described in TIA ss.313(c)) such summaries
of any information, documents and reports required to be filed by the Trust
pursuant to clauses (i) and (ii) of this Section 7.3(a) as may be required by
rules and regulations prescribed from time to time by the Commission.

         (b) Unless the Trust otherwise determines, the fiscal year of the Trust
shall end on December 31 of each year.

SECTION 7.4 Reports by Indenture Trustee. If required by TIA ss.313(a),within 60
days after each August 31, beginning with August 31, 1997, the Indenture Trustee
shall mail to each Noteholder as required by TIA ss.313(c) a brief report dated
as of such date that complies with TIA ss.313(a). The Indenture Trustee also
shall comply with TIA ss.313(b).

         A copy of each report at the time of its mailing to Noteholders shall
be filed by the Indenture Trustee with the Commission and each stock exchange,
if any, on which the Notes are listed. The Trust shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.


                                  ARTICLE VIII

                      ACCOUNTS, DISBURSEMENTS AND RELEASES

         Collection of Money. Except as otherwise expressly provided herein, the
Indenture Trustee may demand payment or delivery of, and shall receive and
collect, directly and without intervention or assistance of any fiscal agent or
other intermediary, all money and other property payable to or receivable by the
Trust Collateral Agent pursuant to this Indenture and the Sale and Servicing
Agreement. The Indenture Trustee shall apply all such money received by it, or
cause the Trust Collateral Agent to apply all money received by it as provided
in this Indenture and the Sale and Servicing Agreement. Except as otherwise
expressly provided in this Indenture or in the Sale and Servicing Agreement, if
any default occurs in the making of any payment or performance under any
agreement or instrument that is part of the Trust Property, the Indenture
Trustee may take such action as may be appropriate to enforce such payment or
performance, including the institution and prosecution of appropriate
proceedings. Any such action shall be without prejudice to any right to claim a
Default or Event of Default under this Indenture and any right to proceed
thereafter as provided in Article V.

SECTION 8.2 Release of Collateral. (a) Subject to the payment of its fees and
expenses pursuant to Section 6.7, the Trust Collateral Agent may, and when
required by the Trust and the provisions of this Indenture shall, execute
instruments to release property from the lien of this Indenture, in a manner and
under circumstances that are not inconsistent with the provisions of this
Indenture. No party relying upon an instrument executed by the Trust Collateral
Agent as provided in this Article VIII shall be bound to ascertain the Trust
Collateral Agent's authority, inquire into the satisfaction of any conditions
precedent or see to the application of any monies.
<PAGE>
                  The Trust Collateral Agent shall, at such time as there are no
Notes outstanding and all sums due the Indenture Trustee pursuant to Section 6.7
have been paid, release any remaining portion of the Trust Property that secured
the Notes from the lien of this Indenture and release to the Trust or any other
Person entitled thereto any funds then on deposit in the Accounts. The Indenture
Trustee shall release property from the lien of this Indenture pursuant to this
Section 8.2(b) only upon receipt of a Trust Request accompanied by an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA) Independent
Certificates in accordance with TIA ss.ss. 314(c) and 314(d)(1) meeting the
applicable requirements of Section 11.1.

SECTION 8.3 Opinion of Counsel. The Trust Collateral Agent shall receive at
least seven days' notice when requested by the Trust to take any action pursuant
to Section 8.2(a), accompanied by copies of any instruments involved, and the
Indenture Trustee shall also require as a condition to such action, an Opinion
of Counsel in form and substance satisfactory to each of the Insurer and the
Indenture Trustee, stating the legal effect of any such action, outlining the
steps required to complete the same, and concluding that all conditions
precedent to the taking of such action have been complied with and such action
will not materially and adversely impair the security for the Notes or the
rights of the Noteholders in contravention of the provisions of this Indenture;
provided, however, that such Opinion of Counsel shall not be required to express
an opinion as to the fair value of the Trust Property. Counsel rendering any
such opinion may rely, without independent investigation, on the accuracy and
validity of any certificate or other instrument delivered to the Indenture
Trustee in connection with any such action.

                                   ARTICLE IX

                             SUPPLEMENTAL INDENTURES


         Supplemental Indentures Without Consent of Noteholders. (a) Without the
consent of the Holders of any Notes but with the consent of the Insurer (unless
an Insurer Default shall have occurred and be continuing), as evidenced to the
Indenture Trustee, the Trust and the Indenture Trustee, when authorized by a
Trust Order, at any time and from time to time, may enter into one or more
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Indenture Trustee, for any of the following purposes:


         (i) to correct or amplify the description of any property at any time
subject to the lien of this Indenture, or better to assure, convey and confirm
unto the Trust Collateral Agent any property subject or required to be subjected
to the lien of this Indenture, or to subject to the lien of this Indenture
additional property;
<PAGE>

         (ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another person to the Trust, and the assumption by any
such successor of the covenants of the Trust herein and in the Notes contained;

         (iii) to add to the covenants of the Trust, for the benefit of the
Holders of the Notes, or to surrender any right or power herein conferred upon
the Trust;

         (iv) to convey, transfer, assign, mortgage or pledge any property to or
with the Trust Collateral Agent;

         (v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture which may be inconsistent with any other
provision herein or in any supplemental indenture or to make any other
provisions with respect to matters or questions arising under this Indenture or
in any supplemental indenture; provided that such action shall not adversely
affect the interests of the Holders of the Notes;

         (vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor trustee with respect to the Notes and to add to or
change any of the provisions of this Indenture as shall be necessary to
facilitate the administration of the trusts hereunder by more than one trustee,
pursuant to the requirements of Article VI; or

         (vii) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualification of this
Indenture under the TIA or under any similar federal statute hereafter enacted
and to add to this Indenture such other provisions as may be expressly required
by the TIA. 

The Indenture Trustee is hereby authorized to join in the execution
of any such supplemental indenture and to make any further appropriate
agreements and stipulations that may be therein contained.

         (b) The Trust and the Indenture Trustee, when authorized by a Trust
Order, may, also without the consent of any of the Holders of the Notes but with
prior notice to the Rating Agencies by the Trust, as evidenced to the Indenture
Trustee, enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to, or changing in any manner or eliminating
any of the provisions of, this Indenture or of modifying in any manner the
rights of the Holders of the Notes under this Indenture; provided, however, that
such action shall not, as evidenced by an Opinion of Counsel, adversely affect
in any material respect the interests of any Noteholder.

SECTION 9.2 Supplemental Indentures with Consent of Noteholders. The Trust and
the Indenture Trustee, when authorized by a Trust Order, also may, with prior
notice to the Rating Agencies, with the consent of the Insurer (unless an
Insurer Default shall have occurred and be continuing) and with the consent of
the Holders of not less than a majority of the outstanding Amount of the Notes,
by Act of such Holders delivered to the Trust and the Indenture Trustee, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; provided, however, that, subject to
the express rights of the Insurer under the Transaction Documents, no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby:
<PAGE>
         (i) change the date of payment of any installment of principal of or
interest on any Note, or reduce the principal amount thereof, the interest rate
thereon or the Redemption Price with respect thereto, change the provision of
this Indenture relating to the application of collections on, or the proceeds of
the sale of, the Trust Property to payment of principal of or interest on the
Notes, or change any place of payment where, or the coin or currency in which,
any Note or the interest thereon is payable;

         (ii) impair the right to institute suit for the enforcement of the
provisions of this Indenture requiring the application of funds available
therefor, as provided in Article V, to the payment of any such amount due on the
Notes on or after the respective due dates thereof (or, in the case of
redemption, on or after the Redemption Date);

         (iii) reduce the percentage of the Outstanding Amount of the Notes, the
consent of the Holders of which is required for any such supplemental indenture,
or the consent of the Holders of which is required for any waiver of compliance
with certain provisions of this Indenture or certain defaults hereunder and
their consequences provided for in this Indenture;

         (iv) modify or alter the provisions of the proviso to the definition of
the term "Outstanding";

         (v) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to direct the Trust to sell or
liquidate the Trust Property pursuant to Section 5.4;

         (vi) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional provisions of
this Indenture or the Transaction Documents cannot be modified or waived without
the consent of the Holder of each Outstanding Note affected thereby;

         (vii) modify any of the provisions of this Indenture in such manner as
to affect the calculation of the amount of any payment of interest or principal
due on any Note on any Distribution Date (including the calculation of any of
the individual components of such calculation) or to affect the rights of the
Holders of Notes to the benefit of any provisions for the mandatory redemption
of the Notes contained herein; or

         (viii) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the Trust Property
or, except as otherwise permitted or contemplated herein or in any of the
Transaction Documents, terminate the lien of this Indenture on any property at
any time subject hereto or deprive the Holder of any Note of the security
provided by the lien of this Indenture. 

<PAGE>
         The Indenture Trustee may determine whether or not any Notes would be
adversely affected by any supplemental indenture upon receipt of an Opinion of
Counsel to that effect and any such determination shall be conclusive upon the
Holders of all Notes, whether theretofore or thereafter authenticated and
delivered hereunder. The Indenture Trustee shall not be liable for any such
determination made in good faith.

         It shall not be necessary for any Act of Noteholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.

         Promptly after the execution by the Trust and the Indenture Trustee of
any supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Holders of the Notes to which such amendment or supplemental
indenture relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.

SECTION 9.3 Execution of Supplemental Indentures. In executing, or permitting
the additional trusts created by, any supplemental indenture permitted by this
Article IX or the modifications thereby of the trusts created by this Indenture,
the Indenture Trustee shall be entitled to receive, and subject to Sections 6.1
and 6.2, shall be fully protected in relying upon, an Opinion of Counsel (and,
if requested, an Officer's Certificate) stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. The
Indenture Trustee may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Indenture Trustee's own rights, duties,
liabilities or immunities under this Indenture or otherwise.

SECTION 9.4 Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and be deemed to be modified and amended in accordance therewith with respect
to the Notes affected thereby, and the respective rights, limitations of rights,
obligations, duties, liabilities and immunities under this Indenture of the
Indenture Trustee, the Trust and the Holders of the Notes shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.

SECTION 9.5 Conformity With Trust Indenture Act. Every amendment of this
Indenture and every supplemental indenture executed pursuant to this Article IX
shall conform to the requirements of the Trust Indenture Act as then in effect
so long as this Indenture shall then be qualified under the Trust Indenture Act.

SECTION 9.6 Reference in Notes to Supplemental Indentures. Notes authenticated
and delivered after the execution of any supplemental indenture pursuant to this

<PAGE>
Article IX may, and if required by the Indenture Trustee shall, bear a notation
in form approved by the Indenture Trustee as to any matter provided for in such
supplemental indenture. If the Trust or the Indenture Trustee shall so
determine, new Notes so modified as to conform, in the opinion of the Indenture
Trustee and the Trust, to any such supplemental indenture may be prepared and
executed by the Trust and authenticated and delivered by the Indenture Trustee
in exchange for Outstanding Notes.

                                    ARTICLE X

                               REDEMPTION OF NOTES

         Redemption. (a) The Notes are subject to redemption in whole, but not
in part, at the direction of the Seller pursuant to Section 11.1(a) of the Sale
and Servicing Agreement, on any Distribution Date on which the Servicer or
Seller exercises its option to purchase the Trust Property pursuant to said
Section 11.1(a), for a purchase price equal to the Redemption Price. The
Servicer or the Trust shall furnish the Insurer and each Rating Agency notice of
such redemption. If the Notes are to be redeemed pursuant to this Section
10.1(a), the Servicer or the Trust shall furnish notice of such election to the
Indenture Trustee not later than 35 days prior to the Redemption Date and the
Trust shall deposit with the Indenture Trustee in the Note Distribution Account
the Redemption Price of the Notes within Five Business Days prior to the
Redemption Date whereupon all such Notes shall be due and payable on the
Redemption Date upon the furnishing of a notice complying with Section 10.2.


         In the event that on the Distribution Date on which the Pre-Funding
Period ends (or on the Distribution Date on or immediately following the last
day of the Pre-Funding Period, if the Pre-Funding Period does not end on a
Distribution Date), any Pre-Funded Amount remains on deposit in the Pre-Funding
Account after giving effect to the purchase of all Additional Receivables,
including any such purchase on such Redemption Date, the Notes will be redeemed
in part and paid sequentially in an aggregate principal amount equal to the
Prepayment Amount.


         (c) In the event that the assets of the Trust are sold pursuant to
Section 9.2 of the Trust Agreement, all amounts on deposit in the Note
Distribution Account shall be paid to the Noteholders up to the Outstanding
Amount of the Notes and all accrued and unpaid interest thereon. If amounts are
to be paid to Noteholders pursuant to this Section 10.1(c), the Servicer or the
Trust shall, to the extent practicable, furnish written notice of such event to
the Indenture Trustee not later than 45 days prior to the Redemption Date
whereupon all such amounts shall be payable on the Redemption Date.

SECTION 10.2 Form of Redemption Notice. (a) Notice of redemption supplied to the
Indenture Trustee by the Servicer under Section 10.1(a) shall be given by the
Indenture Trustee by facsimile or by first-class mail, postage prepaid,
transmitted or mailed prior to the applicable Redemption Date to each Holder of
Notes or record, as of the close of business on the date which is 5 days prior
to the applicable Redemption Date, at such Holder's address appearing in the
Note Register.
<PAGE>
         All notices of redemption shall state:

         (i) the Redemption Date;

         (ii) the Redemption Price; 

         (iii) that the Record Date otherwise applicable to such Redemption Date
is not applicable and that payments shall be made only upon presentation and
surrender of such Notes and the place where such Notes are to be surrendered for
payment of the Redemption Price (which shall be the office or agency of the
Trust to be maintained as provided in Section 3.2); and

         (iv) that interest on the Notes shall cease to accrue on the Redemption
Date.

         Notice of redemption of the Notes shall be given by the Indenture
Trustee in the name and at the expense of the Trust. Failure to give notice of
redemption, or any defect therein, to any Holder of any Note shall not impair or
affect the validity of the redemption of any other Note.

         (b) Prior notice of redemption under Section 10.1(b) is not required to
be given to Noteholders.

SECTION 10.3 Notes Payable on Redemption Date. The Notes to be redeemed shall,
following notice of redemption as required by Section 10.2 (in the case of
redemption pursuant to Section 10.1(a) or (c)), on the Redemption Date become
due and payable at the Redemption Price and (unless the Trust shall default in
the payment of the Redemption Price) no interest shall accrue on the Redemption
Price for any period after the date to which accrued interest is calculated for
purposes of calculating the Redemption Price.

                                   ARTICLE XI

                                  MISCELLANEOUS


         Compliance Certificates and Opinions, etc. (a) Upon any application or
request by the Trust to the Indenture Trustee or the Trust Collateral Agent to
take any action under any provision of this Indenture, the Trust shall furnish
to the Indenture Trustee or the Trust Collateral Agent, as the case may be, and
to the Insurer (i) an Officer's Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with, (ii) an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.
<PAGE>
         Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:

         (i) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the definitions
herein relating thereto;

         (ii) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;

         (iii) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to enable
such signatory to express an informed opinion as to whether or not such covenant
or condition has been complied with; and

         (iv) a statement as to whether, in the opinion of each such signatory
such condition or covenant has been complied with.

         (b) (i) Prior to the deposit of any Collateral or other property or
securities with the Trust Collateral Agent that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture, the
Trust shall, in addition to any obligation imposed in Section 11.1(a) or
elsewhere in this Indenture, furnish to the Trust Collateral Agent and the
Insurer an Officer's Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within 90 days of such
deposit) to the Trust of the Collateral or other property or securities to be so
deposited. Such certificate or opinion of fair value shall satisfy the
requirements of Section 314 of the TIA, as amended.

         Whenever the Trust is required to furnish to the Trust Collateral Agent
and the Insurer an Officer's Certificate certifying or stating the opinion of
any signer thereof as to the matters described in clause (i) above, the Trust
shall also deliver to the Trust Collateral Agent and the Insurer an Independent
Certificate as to the same matters, if the fair value to the Trust of the
securities to be so deposited and of all other such securities made the basis of
any such withdrawal or release since the commencement of the then-current fiscal
year of the Trust, as set forth in the certificates delivered pursuant to clause
(i) above and this clause (ii), is 10% or more of the Outstanding Amount of the
Notes; provided, that such a certificate need not be furnished with respect to
any securities so deposited, if the fair value thereof to the Trust as set forth
in the related Officer's Certificate is less than $25,000 or less than 1%
percent of the Outstanding Amount of the Notes.

<PAGE>
         (iii) Other than with respect to the release of any Purchased
Receivables or Liquidated Receivables, whenever any property or securities are
to be released from the lien of this Indenture, the Trust shall also furnish to
the Trust Collateral Agent and the Insurer an Officer's Certificate certifying
or stating the opinion of each person signing such certificate as to the fair
value (within 90 days of such release) of the property or securities proposed to
be released and stating that in the opinion of such person the proposed release
will not impair the security under this Indenture in contravention of the
provisions hereof.

         (iv) Whenever the Trust is required to furnish to the Indenture Trustee
and the Insurer an Officer's Certificate certifying or stating the opinion of
any signer thereof as to the matters described in clause (iii) above, the Trust
shall also furnish to the Trust Collateral Agent and the Insurer an Independent
Certificate as to the same matters if the fair value of the property or
securities and of all other property other than Purchased Receivables and
Defaulted Receivables, or securities released from the lien of this Indenture
since the commencement of the then current calendar year, as set forth in the
certificates required by clause (iii) above and this clause (iv), equals 10% or
more of the Outstanding Amount of the Notes; provided, that such certificate
need not be furnished in the case of any release of property or securities if
the fair value thereof as set forth in the related Officer's Certificate is less
than $25,000 or less than 1 percent of the then Outstanding Amount of the Notes.

         (v) Notwithstanding Section 2.9 or any other provision of this Section,
the Trust may (A) collect, liquidate, sell or otherwise dispose of Receivables
as and to the extent permitted or required by the Transaction Documents and (B)
make cash payments out of the Accounts as and to the extent permitted or
required by the Transaction Documents.

SECTION 11.2 Form of Documents Delivered to Indenture Trustee. In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.

         Any certificate or opinion of an Authorized Officer of the Trust may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his or her certificate or opinion is
based are erroneous. Any such certificate of an Authorized Officer or Opinion of
Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Servicer, the Seller or the Trust, stating that the information with respect to
such factual matters is in the possession of the Servicer, the Seller or the
Trust, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
<PAGE>
         Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

         Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Trust
shall deliver any document as a condition of the granting of such application,
or as evidence of the Trust's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Trust to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to conclusively rely upon the
truth and accuracy of any statement or opinion contained in any such document as
provided in Article VI.

SECTION 11.3 Acts of Noteholders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Noteholders in person
or by agents duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Indenture Trustee, and, where it is hereby expressly
required, to the Trust. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act" of
the Noteholders signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and (subject to Section 6.1)
conclusive in favor of the Indenture Trustee and the Trust, if made in the
manner provided in this Section.

         The fact and date of the execution by any person of any such instrument
or writing may be proved in any customary manner of the Indenture Trustee.

         (c) The ownership of Notes shall be proved by the Note Register.

         (d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Trust in reliance thereon, whether or not notation of
such action is made upon such Note.

SECTION 11.4 Notices, etc. to Indenture Trustee, Trust and Rating Agencies. Any
request, demand, authorization, direction, notice, consent, waiver or Act of
Noteholders or other documents provided or permitted by this Indenture to be
made upon, given or furnished to or filed with:

         (a) The Indenture Trustee by any Noteholder or by the Trust shall be
sufficient for every purpose hereunder if personally delivered, delivered by
overnight courier or mailed first-class and shall be deemed to have been duly
given upon receipt to the Indenture Trustee at its Corporate Trust Office, or
<PAGE>

         (b) The Trust by the Indenture Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if personally delivered, delivered by
facsimile or overnight courier or mailed first class, and shall deemed to have
been duly given upon receipt to the Trust addressed to: National Auto Finance
1997-1 Trust, in care of Wilmington Trust Company, Rodney Square North, 1100
North Market Street, Wilmington, DE 19890-0001 Attention: Corporate Trust
Administration, or at any other address previously furnished in writing to the
Indenture Trustee by Trust. The Trust shall promptly transmit any notice
received by it from the Noteholders to the Indenture Trustee.

         (c) The Insurer by the Trust or the Indenture Trustee shall be
sufficient for any purpose hereunder if in writing and mailed by first-class
mail personally delivered or telexed or telecopied to the recipient as follows:

   To the Insurer:    Financial Security Assurance Inc.
                      350 Park Avenue
                      New York, NY  10022
                      Attention:  Surveillance Department
                      Re: National Auto Finance 1997-1  Trust, 6.35% Automobile
                      Receivables-Backed Notes
                      Telex No.:          (212) 688-3101
                      Confirmation:       (212) 826-3518
                      Telecopy Nos.:      (212) 339-3518 or
                                          (212) 339-3529

(In each case in which notice or other communication to the Insurer refers to an
Event of Default, a claim on the Note Policy or with respect to which failure on
the part of the Insurer to respond shall be deemed to constitute consent or
acceptance, then a copy of such notice or other communication should also be
sent to the attention of the General Counsel and the Head--Financial Guaranty
Group "URGENT MATERIAL ENCLOSED.")

         Notices required to be given to the Rating Agencies by the Trust, the
Indenture Trustee or the Owner Trustee shall be in writing, personally
delivered, delivered by overnight courier or first class or via facsimile to (i)
in the case of Moody's, at the following address: Moody's Investors Service,
Inc., Attn: ABS Monitoring Department, 99 Church Street, New York, New York
10004, Fax No: (212) 533-0355 and (ii) in the case of S&P, at the following
address: Standard & Poor's Ratings Group, 26 Broadway (15th Floor), New York,
New York 10004, Attention: Asset Backed Surveillance Department, Fax No: (212)
412-0224; or as to each of the foregoing, at such other address as shall be
designated by written notice to the other parties.

SECTION 11.5 Notices to Noteholders; Waiver. Where this Indenture provides for
notice to Noteholders of any event, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class, postage prepaid to each Noteholder affected by such event, at his
address as it appears on the Note Register, not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice. In
any case where notice to Noteholders is given by mail, neither the failure to
mail such notice nor any defect in any notice so mailed to any particular
Noteholder shall affect the sufficiency of such notice with respect to other
Noteholders, and any notice that is mailed in the manner herein provided shall
conclusively be presumed to have been duly given.
<PAGE>
         Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.

         In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.

         Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default or
Event of Default.

SECTION 11.6 Alternate Payment and Notice Provisions. Notwithstanding any
provision of this Indenture or any of the Notes to the contrary, the Trust may
enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Indenture Trustee or any Note Paying Agent to such
Holder, that is different from the methods provided for in this Indenture for
such payments or notices, provided that such methods are reasonable and
consented to by the Indenture Trustee (which consent shall not be unreasonably
withheld). The Trust will furnish to the Indenture Trustee a copy of each such
agreement and the Indenture Trustee will cause payments to be made and notices
to be given in accordance with such agreements.

SECTION 11.7 Conflict with Trust Indenture Act. If any provision hereof limits,
qualifies or conflicts with another provision hereof that is required to be
included in this indenture by any of the provisions of the Trust Indenture Act,
such required provision shall control.

         The provisions of TIA ss.ss. 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.

SECTION 11.8 Effect of Headings and Table of Contents. The Article and Section
headings herein and the Table of Contents are for convenience only and shall not
affect the construction hereof.
<PAGE>
SECTION 11.9 Successors and Assigns. All covenants and agreements in this
Indenture and the Notes by the Trust shall bind its successors and assigns,
whether so expressed or not. All agreements of the Indenture Trustee in this
Indenture shall bind its successors. All agreements of the Trust Collateral
Agent in this Indenture shall bind its successors.

SECTION 11.10 Separability. In case any provision in this Indenture or in the
Notes shall be invalid, illegal or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

SECTION 11.11 Benefits of Indenture. The Insurer and its successors and assigns
shall be a third-party beneficiary to the provisions of this Indenture, and
shall be entitled to rely upon and directly to enforce such provisions of this
Indenture so long as no Insurer Default shall have occurred and be continuing.
Nothing in this Indenture or in the Notes, express or implied, shall give to any
Person, other than the parties hereto and their successors hereunder, and the
Noteholders, and any other party secured hereunder, and any other person with an
Ownership interest in any part of the Trust Property, any benefit or any legal
or equitable right, remedy or claim under this Indenture. The Insurer may
disclaim any of its rights and powers under this Indenture (in which case the
Indenture Trustee may exercise such right or power hereunder), but not its
duties and obligations under the Note Policy, upon delivery of a written notice
to the Indenture Trustee.

SECTION 11.12 Legal Holidays. In any case where the date on which any payment is
due shall not be a Business Day, then (notwithstanding any other provision of
the Notes or this Indenture) payment need not be made on such date, but may be
made on the next succeeding Business Day with the same force and effect as if
made on the date an which nominally due, and no interest shall accrue for the
period from and after any such nominal date.

SECTION 11.13 GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

SECTION 11.14 Counterparts. This Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.

SECTION 11.15 Recording of Indenture. If this Indenture is subject to recording
in any appropriate public recording offices, such recording is to be effected by
the Trust and at its expense accompanied by an Opinion of Counsel (which may be
counsel to the Trust or any other counsel reasonably acceptable to the Indenture
Trustee and the Insurer) to the effect that such recording is necessary either
for the protection of the Noteholders or any other person secured hereunder or
for the enforcement of any right or remedy granted to the Indenture Trustee or
the Trust Collateral Agent under this Indenture or the Collateral Agent under
the Spread Account Agreement.
<PAGE>
SECTION 11.16 Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Trust, the Seller, the
Servicer, the Owner Trustee, the Trust Collateral Agent or the Indenture Trustee
on the Notes or under this Indenture or any certificate or other writing
delivered in connection herewith or therewith, against (i) the Seller, the
Servicer, the Trust Collateral Agent, the Indenture Trustee or the Owner Trustee
in its individual capacity, (ii) any owner of a beneficial interest in the Trust
or (iii) any partner, owner, beneficiary, agent, officer, director, employee or
agent of the Seller, the Servicer, the Trust Collateral Agent, the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Trust, the Seller, the Trust Collateral Agent, the
Servicer, the Owner Trustee or the Indenture Trustee or of any successor or
assign of the Seller, the Servicer, the Trust Collateral Agent, the Indenture
Trustee or the Owner Trustee in its individual capacity, except as any such
Person may have expressly agreed (it being understood that the Indenture
Trustee, the Trust Collateral Agent and the Owner Trustee have no such
obligations in their individual capacity) and except that any such owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity. For all purposes of this
Indenture, in the performance of any duties or obligations of the Trust
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Articles VI, VII and VIII of the Trust
Agreement.

SECTION 11.17 No Petition. The Indenture Trustee and the Trust Collateral Agent,
by entering into this Indenture, and each Noteholder, by accepting a Note,
hereby covenant and agree that they will not at any time institute against the
Seller, or the Trust, or join in any institution the Seller, or the Trust of,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, this Indenture or any of the Transaction Documents.

SECTION 11.18 Inspection. The Trust agrees that, on reasonable prior notice, it
will permit any representative of the Indenture Trustee or of the Insurer,
during the Trust's normal business hours, to examine all the books of account,
records, reports, and other papers of the Trust, to make copies and extracts
therefrom, to cause such books to be audited by independent certified public
accountants, and to discuss the Trust's affairs, finances and accounts with the
Trust's officers, employees, and independent certified public accountants, all
at such reasonable times and as often as may be reasonably requested. The
Indenture Trustee shall and shall cause its representatives to hold in
confidence all such information except to the extent disclosure may be required
by law (and all reasonable applications for confidential treatment are
unavailing) and except to the extent that the Indenture Trustee may reasonably
determine that such disclosure is consistent with its Obligations hereunder.

SECTION 11.19 Limitation of Liability. It is expressly understood and agreed by
the parties hereto that (a) this Agreement is executed and delivered by
Wilmington Trust Company, not individually or personally but solely as Owner
Trustee of the Trust under the Trust Agreement, in the exercise of the powers
and authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of the Trust is made and
<PAGE>
intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose for binding
only the Trust, (c) nothing herein contained shall be construed as creating any
liability on Wilmington Trust Company individually or personally, to perform any
covenant either expressed or implied contained herein, all such liability, if
any, being expressly waived by the parties to this Agreement and by any person
claiming by, through or under them and (d) under no circumstances shall
Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Trust or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaking by the
Trust under this Agreement or any related documents.



<PAGE>
         IN WITNESS WHEREOF, the Trust, the Indenture Trustee and the Trust
Collateral Agent have caused this Indenture to be duly executed by their
respective officers, hereunto duly authorized, all as of the day and year first
above written.

                   NATIONAL AUTO FINANCE 1997-1 TRUST

                   By:   WILMINGTON TRUST COMPANY, not in its
                          individual capacity but solely as Owner Trustee,


                   By:
                         Name:
                         Title:


                   HARRIS TRUST AND SAVINGS BANK, not in its
                   individual capacity but solely as
                   Indenture Trustee and Trust Collateral
                   Agent,


                   By:
                         Name:
                         Title:

<PAGE>
                                    EXHIBIT A

                                  FORM OF NOTE

         UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE FOR NOTES IN DEFINITIVE FORM,
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS NOTE
IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A
NEW YORK CORPORATION, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.

         BY ACCEPTANCE OF THIS NOTE, THE HOLDER AGREES TO TREAT THIS NOTE AS
INDEBTEDNESS FOR FEDERAL INCOME TAX PURPOSES.



<PAGE>
Note Rate:                                Denomination:
                                          $

First Distribution Date:                  Aggregate Principal Balance of
                                          Note: $

CUSIP No.:


Final Scheduled Distribution Date:        Note No.:
                                          1


<PAGE>
                       National Auto Finance 1997-1 Trust

                      % AUTOMOBILE RECEIVABLES-BACKED NOTE,

                                  SERIES 1997-1



evidencing indebtedness of the trust, the property of which includes a pool of
motor vehicle retail installment sale contracts, formed by the National
Financial Auto Funding Trust (the "Seller"). This Note is one of a duly
authorized issue of Notes designated as National Auto Finance 1997-1 Trust %
Automobile Receivables-Backed Notes of the Series specified hereon (herein
called the "Notes").

Except as provided in the Agreement referred to below, this Note does not
represent an obligation of or interest in the Seller, National Auto Finance
Company, Inc. (the "Servicer") or Harris Trust and Savings Bank or any of their
affiliates. Neither this Note nor the underlying Receivables are guaranteed by
any governmental agency or instrumentality. THIS NOTE IS NOT A DEPOSIT AND IS
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION .

         This certifies that CEDE & CO. is the registered owner of the aggregate
principal balance evidenced by this Note, secured by the Trust Property, which
includes a pool (the "Pool") of motor vehicle installment sale contracts and
notes (the "Receivables") and the benefits of a financial guaranty insurance
policy (the "Note Policy") issued by Financial Security Assurance Inc. (the
"Insurer"). The Trust Property was created pursuant to an Indenture (the
"Indenture"), dated as of June 29, 1997, among National Auto Finance 1997-1
Trust and Harris Trust and Savings Bank, not in its individual capacity but
solely as trust collateral agent (the "Trust Collateral Agent") and indenture
trustee (the "Indenture Trustee"), a summary of certain of the pertinent
provisions of which is set forth hereinafter. Capitalized terms used but not
defined herein have the meanings assigned to them in the Indenture. This Note is
issued under and is subject to the terms, provisions and conditions of the
Indenture, to which Indenture, as amended from time to time, the Holder of this
Note by virtue of the acceptance hereof assents and by which such Holder is
bound. In the event of a conflict between the terms of this Note and the
Indenture, the Indenture shall control.

         Pursuant to the terms of the Sale and Servicing Agreement, the Trust
Collateral Agent shall distribute on the 21st day of each month or, if such 21st
day is not a Business Day, the Business Day immediately following (the
"Distribution Date"), commencing on the first Distribution Date specified above,
to the Person in whose name this Note is registered at the close of business on
the last day of the preceding calendar month of such distribution (the "Record
Date"), an amount equal to the Noteholders' Distributable Amount required to be
distributed to Holders of Notes on such Distribution Date.

         Pursuant to the Note Policy, the Insurer has unconditionally and
irrevocably guaranteed the full and complete payment of the Scheduled Payments
(as defined in the Note Policy) with respect to each Distribution Date.
<PAGE>
         Distributions on this Note on each Distribution Date shall be applied
first to accrued and unpaid interest due on this Note and then to unpaid
principal.

         Distributions on this Note will be made by the Trust Collateral Agent
in immediately available funds (by wire transfer or otherwise) for the account
of the Person entitled thereto if such Person holds Notes evidencing an
aggregate denomination of at least $1,000,000 and has so notified the Trust
Collateral Agent, or, if such Person does not hold Notes having such aggregate
denomination or holds such aggregate denomination but has not so notified the
Trust Collateral Agent, by check mailed to the address of the Person entitled
thereto, as such name and address shall appear on the Note Register.
Notwithstanding the above, the final distribution on this Note will be made
after due notice by the Trust Collateral Agent of the pendency of such
distribution and only upon presentation and surrender of this Note at the office
or agency appointed by the Trust Collateral Agent for that purpose in Chicago,
Illinois.

         As provided in the Sale and Servicing Agreement, withdrawals from the
Distribution Account shall be made by the Trust Collateral Agent from time to
time for purposes other than distributions to Noteholders, such purposes
including payment to the Servicer of the Servicing Fee, reimbursement to the
Servicer of certain expenses incurred by it, payment to the Trust Collateral
Agent of its fees and expenses and payment to the Insurer of the premiums and
other amounts owed to it under an Insurance and Indemnity Agreement among
National Auto Finance 1997-1 Trust, the Seller, National Auto Finance Company,
Inc. and the Insurer.

         The Sale and Servicing Agreement permits, with certain exceptions
therein provided, the amendment of the Sale and Servicing Agreement and the
modification of the rights and obligations of the Seller, the Servicer and the
Trust Collateral Agent and the rights of the Noteholders under the Agreement at
any time by the Seller, the Servicer and the Trust Collateral Agent, with the
written consent of the Insurer (unless an Insurer Default has occurred and is
continuing), and the consent of the Holders of Notes pursuant to Section 13.1 of
the Sale and Servicing Agreement. Any such consent by the Holder of this Note
shall be conclusive and binding on such Holder and upon all future Holders of
this Note and of any Note issued upon the transfer hereof or in exchange
therefor or in lieu hereof whether or not notation of such consent is made upon
the Note. The Sale and Servicing Agreement, also permits the amendment thereof
in certain circumstances without the consent of the Holders of any of the Notes
but with the written consent of the Insurer (unless a Insurer Default has
occurred and is continuing).

         As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note is registrable in the Note Register upon
surrender of this Note for registration of transfer at the offices or agencies
appointed by the Indenture Trustee in Chicago, Illinois, duly endorsed by, or
accompanied by an assignment in the form below or other written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Notes of authorized denominations evidencing the same
aggregate outstanding principal balance will be issued to the designated
transferee or transferees.

         The Notes are issuable only as registered Notes without coupons in
denominations specified in the Indenture. As provided in the Indenture and
subject to certain limitations therein set forth, Notes are exchangeable for new
Notes of authorized denominations evidencing the same aggregate Percentage
Interests, as requested by the Holder surrendering the same.
<PAGE>
                  No service charge will be made for any such registration of
transfer or exchange, but the Indenture Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.

                  The Issuer, the Seller, the Servicer and the Indenture Trustee
and any agent of the the Issuer, the Seller, the Servicer or the Indenture
Trustee may treat the Person in whose name this Note is registered as the owner
hereof for all purposes, and neither the Issuer, the Seller, the Servicer, the
Indenture Trustee, the Trust Collateral Agent, nor any such agent shall be
affected by notice to the contrary.

                  No transfer of any Note or interest therein shall be made to
any transferee or purchaser who is, or who is purchasing such Note or interest
therein directly or indirectly on behalf of (i) an employee benefit plan or
other retirement arrangement, individual retirement account or keogh plan
subject to either Title I of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or Section 4975 of the Code (each, a "Plan"), or (ii)
an entity whose assets are deemed to include Plan assets as a result of a Plan's
investment in such entity under Department of Labor Regulation Section
2510.3-101. Any prospective transferee shall be deemed to represent that it is
not purchasing directly or indirectly on behalf of a Plan or Plan Entity and the
Seller and Servicer shall be entitled to rely thereon.

                  It is the intent of the Issuer and the Noteholders that, for
federal, state and local income and franchise tax purposes, the Notes will be
evidence of indebtedness of the Issuer secured by the Trust Property. The Issuer
and the Noteholder, by the acceptance of this Note, agree to treat this Note for
federal, state and local income and franchise tax purposes as indebtedness of
the Issuer secured by the Trust Property.

                  Notwithstanding anything contained herein to the contrary (i)
the Indenture and the Sale and Servicing Agreement have been executed by Harris
Trust and Savings Bank not in its individual capacity but solely as Indenture
Trustee and Trust Collateral Agent, respectively, and in no event shall Harris
Trust and Savings Bank have any liability for the representations, warranties,
covenants, agreements or other obligations of the the Issuer or the Seller
thereunder or in any of the Notes, notices or agreements delivered pursuant
thereto, as to all of which recourse shall be had solely to the assets provided
for therein, and (ii) under no circumstances shall Harris Trust and Savings Bank
be personally liable for the payment of any indebtedness or expenses arising in
connection with the Indenture, the Sale and Servicing Agreement or the Notes or
otherwise. Notwithstanding the foregoing, the Trust Collateral Agent shall
remain and be liable for any breach of its duties and obligations under the Sale
and Servicing Agreement.

                  This Note does not purport to summarize the Indenture or the
Sale and Servicing Agreement and reference is made to the Indenture and the Sale
and Servicing Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby. Copies of the
Indenture, the Sale and Servicing Agreement and all amendments thereto will be
provided to any Noteholder free of charge upon a written request to the
Indenture Trustee, at its principal corporate trust office, 311 West Monroe
Street, Chicago, Illinois 60606, Attention: Indenture Trust Administration.
<PAGE>
                  Unless the certificate of authentication herein has been
executed by or on behalf of the Indenture Trustee, by manual signature, this
Note shall not be entitled to any benefit under the Indenture, or be valid for
any purpose.



<PAGE>
                  IN WITNESS WHEREOF, the Issuer has caused this Note to be duly
executed under its official seal.

                       NATIONAL AUTO FINANCE 1997-1 TRUST



                       By:   WILMINGTON TRUST COMPANY,
                              not in its individual capacity but solely as Owner
                              Trustee


                             By:

                               Authorized Officer






         This is one of the Notes referred to in the within mentioned Indenture.

Dated:                   HARRIS TRUST AND SAVINGS BANK, as Indenture Trustee





                         By:

                                           Authorized Signatory




<PAGE>
                                   ASSIGNMENT

       Social Security or taxpayer I.D. or other identifying number of assignee

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________________________________ the within Note
and all                (name and address of assignee)


         

rights thereunder, and hereby irrevocably constitutes and appoints, attorney, to
transfer said Note on the books kept for registration thereof, with full power
of substitution in the premises.



Dated:______________       _______________________(*)      Signature Guaranteed:

(*) NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.